Investors are likely feeling a bit of whiplash after a wild ride in the market. A vicious selloff turned into an incredible turnaround story all within a few hours. So what did the stock market do today? And what else do you need to know? Dive in with InvestorPlace.
To start, the major indices staged an impressive reversal. The S&P 500 closed higher by 1.95%, while the Dow Jones Industrial Average added 572 points to close up 1.85%. The tech-heavy Nasdaq Composite also closed higher by 1.55%.
You can see the same action in the top movers. Second Sight Medical Products (NASDAQ:EYES) gained more than 300% on Friday. Virgin Galactic (NYSE:SPCE) dropped on news that Chamath Palihapitiya had sold his personal stake. Norwegian Cruise (NYSE:NCLH) and its cruise stocks peers suffered, making their way to the top of many watch lists.
So what did the stock market do today? And why? Here are the three biggest stories to catch up on.
What Did the Stock Market Do Today? Reverse Course.
At one point on Friday, all Wall Street could see was red.
Federal Reserve Chair Jerome Powell really stoked the panic yesterday, failing to reassure investors that he would monitor rising yields on the 10-year U.S. Treasury note. This underwhelming response indicated to many that stocks would continue falling and yields would continue gaining. As a self-fulfilling prophecy, yields on the 10-year note hit a high above 1.6% today.
And yes, the selloff was ugly.
However, everything quickly turned around on Friday. Although yields are still elevated at 1.566%, they are off their daily highs. The major indices started to rally. Experts continued to reassure investors that history is on their side. As InvestorPlace Luke Lango put it, those who keep their focus on long-term opportunities will be winners. Changing course and panicking is not the way to go.
This sell off is vicious. For many, months of gains have been wiped away. Easy to get caught up in the interim volatility. Don’t. History tells us (March 2000, Dec 2018, Jan 2018, etc) the best thing to do during panics is not panic. Stay focused on the long term.
— Luke Lango (@LukeLango3) March 5, 2021
Perhaps one reason for the midday switch in sentiment is just that the 10-year yields started to pull back. But another reason may come from Jared Bernstein, a member of the White House Council of Economic Advisors. Bernstein today took great pains to calm investors down. So many on Wall Street right now are fearful of the $1.9 trillion stimulus plan. Will it put too much cash into the economy and send inflation through the roof?
Bernstein says no way. He admits that the stimulus brings with it a risk of price impact, he says it will not “overheat” the economy. Broadly, he says the economic capacity in the United States is just a lot larger than many retail investors may realize.
Story Stocks or Fairytales?
CNBC analyst Jim Cramer has another perspective to consider about what we saw in the stock market today. Perhaps, as he puts it, story stocks are to blame for the volatile action.
So what is a story stock? Cramer says that so many retail investors have been diving into stocks that tell a story… that you have to believe in a longer narrative for to justify your purchases. These may be pre-revenue companies, or simply ones that trade on daily news. In other words, a lot of the top movers we have seen in recent weeks. Whether or not you believe him, this story stocks angle is one to consider.
Take for instance Virgin Galactic (NYSE:SPCE). The commercial spaceflight company promises to completely disrupt space exploration as we know it. Soon, it will take regular citizens into suborbital space, delivering an experience previously reserved for top astronauts. Along the way, it promises to make investors in SPCE stock big money. However, Virgin Galactic is still working to jump through regulatory hoops and get its spacecraft ready to go. In a sense then, it has been rallying on a terrific story of the disruption coming in space and transportation.
The selloff today highlights the risks in that space. News that Palihapitiya walked away from his personal stake was enough to bring the SPCE stock rocket crashing down. We saw a similar volatile move in pot stocks today, with names like Sundial Growers (NASDAQ:SNDL) and Tilray (NASDAQ:TLRY) plunging on inflation fears.
Cramer recommends industrial stocks like Boeing (NYSE:BA). While this is just one take on what happened in the stock market today, it may be indicative of what is to come. Will we see a flood of investors rushing to safe stock havens?
Winners, Losers, Honorable Mentions
Winners: Oil stocks like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) stand to seriously benefit from extended OPEC production cuts. Reddit is moving forward with an initial public offering thanks to its scrappy r/WallStreetBets crowd.
Losers: Elon Musk unfortunately did not have a very good week. An exploding SN10 sent space stocks falling, and his Tesla (NASDAQ:TSLA) plunged. As a result, Cathie Wood of Ark Invest is another loser. Despite the next-generation promises of her ARK Innovation ETF (NYSEARCA:ARKK), many investors are losing confidence in the fund.
Honorable Mention: McDonald’s (NYSE:MCD) ice cream cones. A simple tweet from GameStop (NYSE:GME) Ryan Cohen sparked a rally in esports stocks and lead to detective-level sleuthing by retail investors. It also made me desperately crave ice cream of my own.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.