Why Almost Nothing Worked in the Stock Market Today

The stock market continued its string of volatile trading sessions on Thursday, and it was an ugly day for most investors. Declines in the Dow Jones Industrial Average (^DJI -0.46%) approached 2%, but that was enough to make it the best performer among major indexes. The S&P 500 (^GSPC -0.45%) and Nasdaq Composite (^IXIC -0.34%) saw even bigger drops, wiping out gains from Wednesday.

Data source: Yahoo! Finance.

Ever since the stock market bottomed in March 2020, investors have generally been able to point to rising stocks in certain areas even on a bad day for the overall market. It's been fairly rare for all three indexes to move downward in lockstep, and rarer still for there to be no harbor in a market storm. Yet on Thursday, that's largely what we saw, with very few places for investors to hide.

Image source: Getty Images.

Bad and less bad

All 11 sectors measured by S&P Dow Jones Indices finished in the red on Thursday. Consistent with the recent countertrend away from the best-performing stocks of 2020, the technology and consumer discretionary sectors saw the biggest declines, with Select Sector SPDR ETFs covering the two sectors finishing down between 3% and 4% on the day. Communication services stocks were also notable detractors from performance, sending the SPDR down 2%.

On recent down days for the market, investors have been able to turn to areas like energy and materials for some support. Yet even though oil prices held well above $60 per barrel on Thursday, energy fell almost 2%. The best performers in the market were utilities and healthcare, and they were both down nearly 1% on the day.

Even those industries usually seen as relatively safe haven't been able to avoid some of the fallout from recent events. For instance, utility and energy retailer Just Energy (JE) fell another 6%, adding to declines that have taken its stock down 40% this week. The company took extreme financial damage due to having to pay high prices for electricity in freeze-battered Texas last week, costing Just Energy $250 million. As a result, the utility warned it might have difficulty remaining a going concern.

Handling a market where everything falls

It's disconcerting to look at your portfolio and see every stock you own fall at the same time. Your first inclination might be to think that you must be a bad investor if you can't even find one stock that will rise in times of trouble.

But it's vital not to give in to that temptation. Down markets happen. Sometimes, you won't have any stock spared from a bad market day.

More importantly, what happens on any given day is inconsequential to the true quality of your investment portfolio. Unless you have specifically taken on a very conservative approach with the goal of protecting yourself from even short-term downturns, you have to expect that an investment portfolio that contains stocks will lose ground when the market drops sharply.

Have a plan

At this point, the mood on Wall Street is getting gloomier. Many foresee continued declines. But it's just as likely that there could be a big bounce on Friday or next week that could make everyone forget about their fears from today.

If you believe the stocks you own will perform well in the long run, then don't worry too much about today's move lower. Shares of companies with strong businesses will bear themselves out in the end, albeit often only after running a turbulent course.