If the pen is mightier than the sword, the tweet is mightiest of all. The S&P 500 index (^GSPC 2.61%) finished trading on Oct. 6 down 48 points, or 1.4%, after President Donald Trump announced in a Tweet that he was halting negotiations on additional economic stimulus until after the election. Prior to the announcement, stocks were on track to have a solid day, with the index up more than 0.5% with just over one hour remaining in the trading session.
Only one sector finished the day higher, with the Utilities Select Sector SPDR ETF gaining 0.8%, and 6 of the 10 best performers today coming from the sector. Electric utilities Edison International (NYSE: EIX) and Alliant Energy (NASDAQ: LNT), both up just over 2%, were two of the top utility stocks. Cruise line stocks were on track to lead the way today, with Carnival (CCL 11.40%) shares spending most of the day up more than 5%, but closed up 1.4% as the thesis of economic stimulus helping prop up struggling industries came a bit unraveled.
On the downside, Boeing (BA 5.32%) shares lost 6.8% after the company cut its 10-year forecast for commercial aircraft sales, pulling American Airlines (AAL 7.97%) and General Electric (GE 5.48%) shares 4.5% and 3.7% lower too. A bevy of oil stocks, including Diamondback Energy (FANG 4.65%) and Marathon Oil (MRO 5.05%) fell late in trading as the President's tweet cast doubt on the oil industry's ability to ride out a downturn that may persist without economic stimulus in the near term, wiping out earlier gains in crude oil prices that put U.S. oil futures briefly back above $40 per barrel.
Tech stocks tumble
Tech stocks closed down sharply today, starting at the top of the index. Giants Apple (AAPL 1.95%) and Amazon (AMZN 4.90%) fell 2.9% and 3.1%, with Microsoft (MSFT 3.28%), Alphabet (GOOG 2.93%) (GOOGL 2.81%), and Facebook all losing more than 2% in a day that saw only a handful of tech stocks gain in value. All five remain down more than 10% from their recent highs, early in September:
Investors turning to safety?
Utility stocks have lost about 4% of their value this year; not a typical result during a recession since utilities are often safer, less-volatile investments during periods of economic uncertainty. But with the massive interruptions in industrial and commercial activity under the coronavirus pandemic, investors have not been so patient with these companies, many of which have seen their results weaken as power and other utility demand has softened. Today's move higher was a mini-reversal, and it's likely that some investors may have moved money out of more volatile stocks and into the more steady, predictable prospects utilities can offer.
The utility sector pays a dividend yield above 3%, making it a solid source of predictable income for investors who are searching for yield, but wary of volatility in other sectors.
Boeing: Outlook for the next decade a little less rosy
The aerospace giant releases an updated 10- and 20-year outlook every year, and the latest version came with significantly lower expectations for the decade ahead. In short, Boeing cut its 10-year outlook for commercial aircraft deliveries by 11%. The company expects that it will take the airline industry several years post-COVID to fully recover, and that fact will delay a significant number of orders for the company's "narrow-body" aircraft, mainly the 737 MAX.
However, with that weak decade to come, the company expects the next 20 years will be about as good as it had expected a year ago. Over the next two decades, Boeing expects to deliver just over 43,000 aircraft, down modestly from last year's forecast for just over 44,000.
Airlines are spending billions in cash to stay afloat today, and that's going to prevent many from adding or replacing aircraft at the same rate as pre-COVID when air travel finally does recover. But the long-term demographic trends of population growth and a growing global middle class will eventually result in a return to growth for Boeing's commercial aviation business. But it's going to take years to get to that point.
What happens next?
It's hard to predict what happens next with stocks, at least in the coming days or weeks, beyond expecting more volatility on the uncertainty of the economic environment. For investors with cash in stocks they may need to pay bills in the short term, it's probably a good idea to reduce your exposure to the potential downside, even if it means earning low yield on government bonds or savings.
But for those long-term assets you won't need to touch for years to come, it might be time to avoid looking into your brokerage accounts and sit on your hands. It's also a good time to be thinking about making sure you have some small cash ready to act for the next stock market downturn. It may happen this year, or it may not happen for years to come. But having some cash to invest in a downturn can keep you from trying to time the market top, and end up sitting on too much cash while the market just keeps moving higher.