U.S. Stock ETFs Pare Early Losses, Wait for Next Catalyst

U.S. markets and stock exchange traded funds tried to pare early morning losses on Thursday, with technology stocks falling behind.

On Thursday, the Invesco QQQ Trust (NASDAQ: QQQ) was down 0.5%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) rose 0.2%, and iShares Core S&P 500 ETF (NYSEArca: IVV) was up 0.1%.

“This is likely just one of those periods where you have a little profit taking and a little quarter-end rebalancing, but this little pullback will probably run its course and we’ll see the market back at new highs fairly soon,” Jordan Kahn, chief investment officer of ACM Funds, told Reuters.

Investors remain focused on the direction of the economy and supportive policies that will help keep the recovery in motion. Federal Reserve Chair Jerome Powell already expressed optimism over a strong economic rebound, but Treasury Secretary Janet Yellen warned that tax hikes will be needed to pay for public investments, especially after the $1.9 trillion stimulus package.

Meanwhile, President Joe Biden is targeting a new goal for U.S. vaccinations against COVID-19. He is also expected to reveal a multitrillion-dollar infrastructure plan.

“It’s a tale of two different markets at this point and it depends on what the market wants to focus on,” Faron Daugs, founder and chief executive officer of Harrison Wallace Financial Group, told Reuters. “Does it want to focus on stimulus, increased vaccinations and re-opening economies or on potential taxes, increased regulation potentially in certain sectors, extremely high spending and inflation.”

In this type of market, investors are showing little willingness to reach back into market segments other than more defensive plays.

“From here, you could have in aggregate flattening markets. We’re going to be looking for a new narrative,” Daniel Morris, chief market strategist at BNP Paribas Asset Management, told the Wall Street Journal. “Growth could recover, value could wait, and then on the surface nothing happens. I have modest expectations for the market until we get a sense of what the next catalyst is.”

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