Stocks spent most of Wednesday in negative territory as investors mulled the latest Russia-Ukraine headlines.
Following Tuesday’s reports that Russia was withdrawing some troops from Ukraine’s border (which gave markets a boost), NATO Secretary-General Jens Stoltenberg on Wednesday said his organization has not seen any de-escalation. “On the contrary, it appears that Russia continues its military buildup,” Stoltenberg told a group of defense ministers from NATO’s member states at a meeting in Brussels.
But the major benchmarks erased their earlier losses after the release of the minutes from the Federal Reserve’s January policy meeting.
“In markets, timing is everything, and the delayed reaction [to raise rates] from the Fed has investors convinced that aggressive policy tightening is on the horizon,” says Charlie Ripley, senior investment strategist for Allianz Investment Management.
And although today’s minutes did indicate the central bank is poised to raise rates at a quicker pace than it did during the last tightening cycle in order to combat surging inflation, “there was nothing in the minutes that suggested the Fed would be more aggressive than what the market has already priced in,” Ripley adds.
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While the Dow Jones Industrial Average (-0.2% at 34,934) and Nasdaq Composite (-0.1% at 14,124) still ended the day in the red, the S&P 500 Index (+0.1% at 4,475) managed to hang on for a win.
Other news in the stock market today:
- The small-cap Russell 2000 gained 0.1% to end at 2,079.
- The Russia-Ukraine news sparked a fire under U.S. crude futures, which ended up 1.7% at $93.66 per barrel.
- Gold futures rose 0.8% to settle at $1,871.50 an ounce.
- Bitcoin slipped 0.2% to $44,120.38. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- Also in focus today was the latest retail sales data, which showed retail sales jumped by a seasonally adjusted 3.8% in January, much higher than forecast (though Kiplinger economist David Payne says the results come with an asterisk). “Retail sales and core retail sales both increased by more than expected in January, reflecting strong spending even after allowing for a boost from residual seasonal factors, and only a modest drag from Omicron on spending at eating and drinking establishments,” Goldman Sachs economists wrote in a note.
- Roblox (RBLX) shares plunged 26.5% after the open gaming platform reported a fourth-quarter loss of 25 cents per share and bookings of $770 million. Analysts, on average, were expecting a slimmer per-share loss of 13 cents on $772 million in bookings. Still, RBLX reported 49.5 million daily active users, up 33% year-over-year. CFRA Research analyst John Freeman says he expects losses to “continue until 4Q22, driven by a somewhat troubling doubling of G&A and R&D expenses (ex-stock comp.) and a 47% higher expense related to the labor-intensive monitoring and security enforcement to ensure safe interactions on the platform, a key imperative given the majority of daily active users are still under 18.” However, he kept a Strong Buy rating on the metaverse stock.
- Shopify (SHOP) was another post-earnings loser, sinking 16% after its results. While the e-commerce platform reported higher-than-expected earnings per share and revenue in its fourth quarter, it warned fiscal 2022 revenue growth would slow compared it 2021. “We expect merchant solutions to continue to benefit from strong growth in merchant sales, up 35%, and as Shopify Payments see greater penetration (49% of GMV vs. 45% a year ago),” says CFRA Research analyst Angelo Zino (Hold). “We also think Shop Pay Installments (buy now, pay later product) is seeing greater traction as it has proven to boost repeat purchases among first time customers by 23%. Despite decelerating growth, we remain encouraged by e-commerce trends and new growth opportunities.”
A Special Breed of Dividend Payers
With geopolitical uncertainty front and center, markets are likely going to remain volatile.
“In the short term, stocks are moving in lockstep with headlines from the Russia/Ukraine situation,” says David Bahnsen, chief investment officer at wealth management firm The Bahnsen Group.
He counsels investors to make sure their portfolios are well-constructed, with “high-quality stocks with strong cash flows and a long history of dividend growth.” There are many different corners of the market investors can look to find solid dividend growers.
The Dividend Aristocrats – companies that have raised their dividend payments annually for the last 25 years – is certainly a good place to start, as are the yield-friendly real estate, healthcare and energy sectors.
Another strategy is to home in on companies that consistently pay “special dividends,” or additional one-time payouts on top of their regular dividends. In any given year, there are typically only a handful of companies that reward shareholders with these bonus dividends, and these 10 names are shining examples of this special breed.