Investors struggled to decipher several mixed signals Tuesday, selling off the broader market even as a transition into earlier-year laggards continued.
For instance, Russia President Vladimir Putin announced the first registered COVID-19 vaccine, but the drug has been rushed through an accelerated timeline and hasn't even finished Phase III trials, raising wide skepticism over its efficacy.
Democrats and the White House signaled a willingness to return to stimulus negotiations Monday evening, but they haven’t yet scheduled any talks. And President Donald Trump said he was "seriously considering" a capital-gains tax cut last night, but offered no details about the idea – one that he has previously floated.
The Dow Jones Industrial Average snapped a seven-session streak of gains, but its losses were modest, down 0.4% to 27,686. The S&P 500 lost 0.8% to 3,333, and the small-cap Russell 2000 declined by 0.7% to 1,574.
The Nasdaq Composite, however, finished deep in the red, off 1.7% to 10,782. And gold, which has delivered red-hot gains in 2020, gapped down 4.6% to settle at $1,946.30 per ounce.
The Market's Leadership Continues to Change
The beneficiaries of the recent rotation? Financial stocks, for one. JPMorgan Chase (JPM, +3.2%) and American Express (AXP, +1.6%) were two of the Dow's top finishers Tuesday. 3M (MMM, +1.2%) also finished significantly higher in another resilient performance for industrial stocks as a whole.
The financial and industrial sectors are up 5.5% and 6.8%, respectively, over the past five days, versus a less-than-1% gain for the S&P 500. This latest "changing of the guard," for however long it lasts, also has the potential to help out highly regarded high-yield dividend stocks.
High-income equities already have in advantage in that they're among the few options left for yield-starved investors.
"Our expectation is that yields across the curve will remain near historically low levels, likely for years," write Wells Fargo Investment Institute analysts. "We also expect such an extended low-rate environment to drive investors into more yield-oriented investments. We have seen this trend develop in recent months, and we expect it to continue. We believe that investors may want to consider acquiring yield-oriented investments."
But a rotation could help out several high-yield stocks, too.
Several of Wall Street’s more dependable dividend payers, including a number of Dividend Aristocrats, have been maligned for much of 2020, and their share-price declines have brought their yields well above 4%. However, while many similar downtrodden stocks have had to cut or suspend their dividends, these seven high-yield dividend stocks appear poised to keep their payouts pumping – and better still, most are positioned in industries catching a tailwind from this rotation.