Stock Market Today: Investors Seeking Safety Drive Stocks Higher

Defensive stocks and the Nasdaq were in rare alignment, leading the way Thursday as much of Wall Street watched Federal Reserve Chairman Jerome Powell continue his economic tightrope walk.

A day after telling the Senate Banking Committee that a recession is ‘certainly a possibility’, Powell told the House Financial Services Committee that ‘I don’t think a recession is inevitable’ – but again stressed the importance of bringing inflation down to 2%.

“With Chairman Powell finally acknowledging that if a soft landing is possible, the Fed’s commitment to lower inflation could drag the economy into a recession, the market is oscillating between fear of growth and full recession” said Quincy Krosby, chief equity strategist for LPL Financial. “With a still strong labor market, there is a growing sense that the Fed is now moving quickly to make up for lost time in its fight against inflation.”

The tightness of the labor market remained evident in the latest unemployment data from the Labor Department. Initial claims for the week ended June 18 came to 229,000 – slightly above the median forecast of 226,000 but below the previous week’s revised 231,000.

However, June’s Purchasing Managers’ Index (PMI) showed some signs of strain, with the manufacturing reading down to 52.4 from 57.0 and the services PMI down to 51.6 from 53.4. Although both figures still represent an expansion, this expansion has been much slower than economists had expected.

Sign up for Kiplinger’s FREE Investing Weekly e-newsletter for stock, ETF and mutual fund recommendations, plus other investing tips.

The 10-year Treasury yield continued to fall, hitting a low of 3.01% in the session, as investors bought bonds and ducked for cover. (Remember: bond prices and yields move in opposite directions.) People were also looking for safety in certain parts of the stock market: utilities (+2.4%) is in the lead, with Health care (+2.2%) and basic consumption (+1.9%) also making decent gains. But lower rates have also allowed tech and tech stocks such as Amazon.co.uk (AMZN, +3.2%) and Intuitive (INTU, +5.2%) to float higher.

The result was a solid 1.6% increase in Nasdaq Compoundto 11,232. It was followed by a 1.0% gain to 3,795 for the S&P500while the Dow Jones Industrial Average closed up 0.6% at 30,677.

Other news on the stock market today:

  • Small cap Russell 2000 saw a 1.3% improvement to 1,711.
  • U.S. Crude Futures lost 1.8% to settle at $104.27 a barrel.
  • Gold Futures Contracts slid 0.5% to end at $1,829.80 an ounce, marking a fourth consecutive loss.
  • Bitcoin surged 3.9% to $20,901.70. Bitcoin trades around the clock; prices listed here are at 4 p.m.)
  • We work (WE) jumped 15.7% after Credit Suisse analyst Tayo Okusanya launched a hedge on the shared office stock with an outperform rating and a price target of $11, around 76% higher than today’s closing price of $6.26. Shared office stock is a top pick in Credit Suisse real estate investment trust (REIT) coverage and will likely benefit “from a combination of technological innovation (e.g. 5G), industry disruptions (e.g. , the adoption of hybrid working and coworking), demographic aging trends and overall migration trends in the United States,” says Okusanya.
  • Knowledge base home (KBH) jumped 8.6% after the homebuilder reported earnings. In its second fiscal quarter, KBH reported higher-than-expected adjusted earnings of $2.32 per share and revenue of $1.7 billion, marking year-over-year growth 55% and 19%, respectively. Still, CFRA Research analyst Kenneth Leon maintained a Hold rating on KBH stock. “Our Hold rating on KBH is based on an expected drop in demand for home purchases, with mortgage rates rising above 6% and going higher,” Leon said. “Bearish views on rising rates and housing affordability are likely to hurt KBH’s traffic and performance.”

Is Artificial Intelligence the Smart Play?

Tech stocks have been among the best performers since the S&P 500 bottomed out in the bear market (or at least as low as it has gone so far) on June 16. The sector has grown by 4.6% since then – a welcome respite amid what has seen a decline of more than 25% in 2022.

But maybe now is the time for investors to pick up some of those battered tech stocks.

You might consider looking into some of the most proven areas of technology, as some industries have been hit harder than others. The artificial intelligence (AI), for example, took a really nasty hit to the chin. Using the TrueShares Technology, AI & Deep Learning Fund (LRNZ) – an exchange-traded theme fund (ETF) – as a proxy, AI stocks have lost almost 40% this year.

AI, however, is a massive and growing market that is expected to reach $62 billion by the end of 2022, an increase of 21% from 2021. This involves investments in the industry, such as these 10 AI stocksone to watch for growth-oriented investors, especially when it can be bought at a (relatively) cheap price.

Robert D. Coleman