Stocks struggled to get off the ground on Tuesday amid concerns that a visit to Taiwan by U.S. House Speaker Nancy Pelosi will raise political tensions between Washington and Beijing. This marks the first visit by a House speaker to Taiwan since 1997 – and sparked warnings by China of retaliatory measures. It claims the self-ruled island as part of its territory.
And underwhelming jobs data did little to lift investor sentiment. The latest Job Openings and Labor Turnover (JOLTS) data showed job openings fell to 10.7 million in June from 11.3 million in May.
The number of hires and quits also slowed on a month-over-month basis, which could indicate the job market is leveling off, says Robert Conzo, CEO of investment advisory firm The Wealth Alliance. "We believe the Fed will utilize this data point to determine if the economy is slowing," Conzo adds. "Although continued interest rate rises may occur in the near term, data such as this may warrant smaller hikes than originally planned, helping the Fed to engineer a soft-landing."
On the earnings front, Caterpillar (CAT) fell 5.8% as the construction giant's top-line miss overshadowed higher-than-expected earnings. Plus, CAT's Q2 sales are still lower than pre-pandemic levels, and the company's 11% year-over-year rise in revenue is more reflective of higher prices versus additional products being sold, says CFRA Research analyst Colin Scarola.
Sign up for Kiplinger's FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.
Caterpillar's loss weighed on the Dow Jones Industrial Average, which fell 1.2% to 32,396. The S&P 500 Index (-0.7% at 4,091) and Nasdaq Composite (-0.2% to 12,348) also ended in negative territory.
Other news in the stock market today:
There's likely more volatility ahead, which makes the case for high-quality stocks as strong as ever. True, the S&P 500 just marked its best month since November 2020 and its best July since 1939, says Savita Subramanian, head of equity and quantitative strategy at BofA Securities, but "we view this as a bear market rally."
No need for investors to be alarmed. Bear market rallies, which are simply short-term stock market rebounds amid a longer-term decline, are common, adds Subramanian. She points out that they have occurred 1.5 times, on average, in each bear market going back to 1929. But combine this with the fact that August and September are, historically, two of the weakest months for the S&P 500, the strategist says, and it's likely that volatility will continue. As such, she prefers high-quality stocks.
Investors looking for high-quality stocks will want to focus on those prioritizing shareholder-friendly initiatives like share buybacks or impressive yields, as these can help protect portfolios against broad-market downturns. They'll also want to consider the best dividend growth stocks, which can provide both income and capital appreciation over the long haul. Read on as we explore 10 such stocks that are expected to grow their dividends and revenue by at least 10% over the next two years.
Kiplinger is part of Future plc, an international media group and leading digital publisher. Visit our corporate site www.futureplc.com
© Future US LLC, 10th floor, 1100 13th Street NW, Washington, DC 20005. All rights reserved.