The Dow Jones Industrial Average fell 46 points on an up-and-down day for the broader index after a surprisingly strong jobs report seemed to confuse investors about the current state of the economy.
This morning the U.S. Bureau of Labor Statistics reported that nonfarm payrolls added 372,000 jobs in June, exceeding estimates of just 250,000. Unemployment remained at a rock-solid 3.6%, the same as it was in May, suggesting the job market remains very strong.
"The strong 372,000 gain in non-farm payrolls in June appears to make a mockery of claims the economy is heading into, let alone already in, a recession," said Andrew Hunter, a senior economist at Capital Economics.
The news is the latest wrinkle in the market's economic outlook, which seems to change weekly and get more confusing by the day. While one would think a strong jobs market is good news, it could also suggest that inflation is still moving higher, so it's another thing for investors to grapple with as they try to think about the future. While the Dow fell, several stocks managed to escape the day with gains.
No sector, in particular, seemed to stand out or perform poorly today. The healthcare insurance company UnitedHealth Group (UNH 0.14%) continued to find itself at the top of the Dow. The stock finished just under 1% higher and is up more than 6% over the past month, which compares favorably to the Dow, which is down close to 3% since early June.
Nothing specific seems to be driving UnitedHealth higher today, but insurance stocks have fared well this year. Insurance typically doesn't get scrapped from the consumer's budget even when times get tough, and so insurers are able to pass higher costs from inflation onto their customers.
The second-best finisher in the Dow was the credit card and payments company American Express (AXP 0.27%), which finished the day about half a percent higher.
In this case, I think American Express is a clear beneficiary of the strong jobs report today because it suggests the consumer could be in better shape than people thought. This would be great for American Express, which benefits when consumers are spending and paying off their debt.
That's why banks like some inflation but not so much inflation that it would knock the economy into a recession, which could slow spending and lead to a spike in loan defaults.
The consumer tech giant Apple (AAPL -1.00%) was the third-highest finisher in the Dow, with shares ending the day nearly half a percentage point higher. I didn't see anything specific driving Apple higher today.
Are any of these stocks buys?
If there is one stock among this group I might look at today, it would be banks like American Express. As I mentioned above, banks are going to benefit a lot from rising interest rates. They haven't seen this kind of rapidly rising-rate environment since the Great Recession.
But it will be even more beneficial if the consumer can stay strong and the economy can avoid a severe recession because then banks can also find loan growth. The banking sector as a whole has taken a hit. American Express is down close to 16% in 2022. Now could be the right time to buy in.