Friends
With a little whiff of inflation, bonds sold off just a bit this morning which got the attention of the stock market. Stocks sold off, led by a big drop in the price of consumer staples, namely P&G, Clorox, Altria (Philip Morris) and others. With the uptick of rates, banks actually had a good day and energy shares did well.
By the close, the Dow Jones Industrial Average was down 83 points to finish the day at 24,664. The S&P 500 was down 15 points to close at 2,693. Gold was down $5 to trade at $1,347 per ounce, while oil was down $.21 to trade at $68.26 per barrel WTI.
As for those beaten up staples, it’s not that their earnings are bad, quite the opposite. Instead, when rates rise a little, low growth dividend payers get sold and banks get bought. A day or two from now bonds could rally (in price) and these stocks could bounce right back. But the belief that rates will rise weighs heavy on dividend payers, as potentially their yields look less attractive on a comparative basis. Of course, as if waiting for Godot, we’ve been waiting for rates to rise for years.
Have a nice evening everyone.
