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The Stock Market's Performance Wednesday Was Extraordinary. Here's Why

By Dan Caplinger – Aug 12, 2020 at 4:38PM

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We saw something that hasn't happened much lately.

Wednesday was a great day on Wall Street. Major market benchmarks like the Dow Jones Industrial Average (^DJI -0.38%), S&P 500 (^GSPC -1.03%), and Nasdaq Composite were all significantly higher, sharing in the good news that helped propel the entire market upward. In the end, the S&P 500 fell just short of hitting a record high, but the gains were nevertheless noteworthy.

Today's stock market

Index

Percentage Change

Point Change

Dow

+1.05%

+290

S&P 500

+1.40%

+47

Nasdaq Composite

+2.13%

+229

Data source: Yahoo! Finance.

Investors saw something on Wednesday that they haven't seen from the stock market in a long time. Rather than pointing to a single narrow segment of the market as responsible for gains, market participants noticed a broad-based advance across nearly the entire economy. That bodes well for the sustainability of a bull market move that's already largely produced the V-shaped bounce that optimists had hoped for back in February and March.

A balanced attack

Bulls could see gains in many different industries. Seven different sectors of the market were up 1% or more, but none rose more than 2.25%. Of the remaining sectors, only one -- financials -- lost ground on the day.

It's true that technology stocks dominated the headlines and led the market higher. The Technology Select Sector SPDR (XLK -0.83%) was the 2.25% gainer, led by the cream of the technology crop. Yet even there, most of the big players in tech saw similar-sized gains, with only a few big gainers standing out.

Plenty of the other strong performers, though, were in very different businesses:

  • Healthcare stocks managed to rise nearly 2%, with particular attention to some coronavirus-sensitive areas of the industry.
  • Utility stocks climbed 1.75%. Despite an upward move in interest rates that would ordinarily hurt the rate-sensitive sector, investors liked the idea that a more vibrant economy could restore utility use to pre-crisis levels.
  • Consumer staples and consumer discretionary stocks both picked up around 1.5%. Even with the market surging, some investors like the reliability of defensively positioned companies. Others see an improving economy lifting discretionary purchase activity.
  • Real estate and communication services also managed to climb more than 1%.
Several people in front of a sea of computer screens with stock quotes on them.

Image source: Getty Images.

What a bull market needs

At first glance, these balanced gains might not seem all that important. Yet bull markets thrive on positive sentiment, not just within a few key industries but across the entire stock universe. When different industries do well, they feed on each other's success. That can create more dramatic moves higher.

A single day isn't evidence that stocks have turned a corner and entered a new phase of a bull market. However, it does suggest that investors are looking beyond just a few favorite stocks to find great investments wherever they can find them. Given how worried many market participants have been that the recovery from March's lows was based on just a few hot companies, that's welcome news. If the positive trends continue, then it could bring a lot more good news for long-term investors, no matter what their particular specialty happens to be.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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