Dow Jones Stocks
Dow Jones Until the FOMC starts raising short-term rates in 2022, income investors will be squeezed unless they shift to the riskier parts of fixed income or move to equity funds that have options Dow Jones.
The Nuveen Dow 30SM Dynamic Overwrite Fund (NYSE: DIAX ) is a high-growth Dow Jones Industrial Average fund that I review here. I will also review the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) and then compare whether investors benefit from the DIAX income strategy.
Although only a year old, the results for this type of pairing are typical: higher income and lower returns compared to standard ETFs.
SPDR Dow Jones Industrial Average ETF
US stocks were higher in midday trade in a tug-of-war session after President Joe Biden assured depositors at Silicon Valley Bank (SVB) that their money would be protected and that the crisis could lead to a pause in Fed rate hikes.
By midday, the Dow was up 299 points at 32,208, while the S&P 500 was up 40 points at 3,901 and the tech-heavy Nasdaq was up 140 points at 11,279. “There are a lot of moving parts, so you see volatility,” said Keith Buchanan, senior portfolio manager at Globalt Investments.
“There are many different conditions that can cause this, but it comes down to: How widespread is the risk of this infection?” he added. Notable movers included First Republic Bank, which fell more than 60% on fears that SVB’s crisis could spread to other regional banks.
US stocks started falling sharply as the collapse of Silicon Valley Bank (SVB) sent shockwaves through financial markets. After the open, the Dow Jones Industrial Average fell 232 points, or 0.7 percent, to 31,678, the S&P 500 lost 37 points, or 1 percent, to 3,825, and the Nasdaq Composite lost 90 points, or 0.8 percent, to 11,048.
“While the Fed has stepped in to effectively support SVB clients, which means taxpayers have nothing to lose, broader concerns about the US banking sector are weighing heavily on investor sentiment,” said James Harte, market analyst at TickMill Group. In addition, the National Franchise Authority announced it would close Signature Bank to avoid a similar collapse of SVB’s bank due to tight liquidity, Harte noted.
“Fears of wider contagion from the collapse of SVB and the closure of Signature Bank have led to significant selling pressure on the stock,” he said. “With liquidity issues in the financial sector likely to remain a key issue, further equity losses are likely in the near term.”
Shares of First Republic Bank opened up more than 65% as investors bet it would be the next bank to fall.
The bank said over the weekend that it had secured additional funding from JPMorgan to boost its liquidity levels. “However, the news failed to convince traders and shares are currently falling,” Harte noted, worried about a possible launch rally.
Regional banks Western Alliance Bancorp and PacWest Bancorp also fell 75% and 46%, respectively, at the open.
Wall Street was poised to open higher after U.S. regulators stepped in to protect depositors at collapsed Silicon Valley Bank (SVB) and Signature Bank, the collapse of two tech-focused banks making it unlikely the Fed will pursue a hawkish plan when it decides later. this month when the next rate hike.
Dow Jones Industrial Average ( DJIA ) futures rose 0.1% in premarket trading Monday, while the broader S&P 500 futures rose 0.4% and Nasdaq 100 futures rose 1%. US stocks fell sharply on Friday after SVB, bailed out by the Federal Deposit Insurance Corporation (FDIC), collapsed and a new bank was created to guarantee deposits of up to $250,000.
The Dow closed up 1.1% at 31,910, the Nasdaq Composite fell 1.8% at 11,139 and the S&P 500 lost 1.5% at 3,862. The Russell 200 index of small companies fell 3.2% to 1,769 points.
Crypto Bank Signature was also shut down on Sunday after regulators said there was a risk of a systemic bank failure. All signatory depositors will be “made whole,” the FDIC said, adding that as with the SVB resolution, U.S. taxpayers will not suffer any losses.
Patrick Munnelly, market analyst at TickMill Group, commented: “The move by the US regulator is seen as an urgent and important safeguard for the banking system, allaying some of the concerns raised during the GFC (Global Financial Crisis).” “Investors’ attention will turn to tomorrow’s US CPI data as there is a clear lack of primary data during the European and US sessions,” he added. “However, given the stress in the banking system over the weekend, the announcement may have lost its meaning as the Fed’s focus on fighting inflation has shifted to preventing systemic stress.”
“Goldman Sachs now believes the Fed’s hands are tied with stress in the banking system, so they don’t expect the FOMC (Federal Open Market Committee) to raise interest rates at its March 22 meeting, which lifted bonds overnight, putting pressure on US Treasuries 2 annual yields are below 4.5 percent again,” he said. Munnelly noted that U.S. core inflation data due later this week would show a “modest retreat” to 5.5% in February from January’s 5.6% year-on-year rise.