Stocks fell today, sending the S&P 500 to a third day of losses, as investors considered prospects for economic growth and the pace of Federal Reserve stimulus actions. “Markets are having a difficult time holding onto gains of any kind,” Peter Kenny, chief market strategist at Knight Capital Group Inc. in Jersey City, New Jersey, said. “Buying is suddenly becoming less automatic given the backdrop of the Fed narrative. It appears as though whenever the market pops its head up and trades in the green, institutions lighten up, hedge risk and provide supply. It appears as though the easy lifting is behind us.”
The dollar dropped to its lowest level in four months today, on the uncertainty of whether the Federal Reserve will begin to taper back its loose monetary policy. “There is broad volatility and people are afraid the Fed will push off its bond-buying tapering until later in the year,” Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, said.
According to analysts, cyclicals are beginning to look more attractive to investors right now — ahead of the summer months — as the economy continues to show signs of improvement. “There’s been a lot of turbulence in the global markets, but the underlying bullish story is still intact,” said Thomas Lee, chief U.S. strategist at JPMorgan. “There’s a story of wealth effect helping the global consumer, particularly in the U.S., and U.S. housing continues to be strong. [Investors] are still underweight cyclical stocks, so the story of markets being driven by cyclicals is intact.”