Stock ETFs Regain Some of the Week's Lost Ground

After a protracted selloff over the last few days, stocks and index ETFs retraced some of the downside on Thursday, rebounding from heavy losses despite more hot inflation data.

The Dow Jones Industrial Average added 1.28%, while the S&P 500 climbed 1.14%, with all 11 sectors of the market trading in positive territory, a stark contrast to the previous session. The tech-heavy Nasdaq Composite also advanced 0.7% as beaten down tech stocks like Apple and Microsoft both bounced over 2%.

Major stock ETFs are recovering some lost ground on Thursday as well. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are all green just before 12:30 PM EST.

The move higher Thursday prompted optimism from some analysts, who feel that this week’s action signals just a pullback in a continuing uptrend.

“This bull market ultimately has further to run,” said Keith Lerner, chief market strategist at Truist. “Investors who are underweight equities should look to average into the market weakness and become more aggressive.”

While most sectors suffered damage this week, some investors were more enthusiastic about the economy, championing reopening trades like airlines and cruise line operators. The optimism helped fuel American Airlines, United, and Delta over 2% higher, and boosted the U.S. Global Jets ETF (JETS) by 1.37%. Meanwhile, cruise operators like Carnival and Norwegian also popped over 2%, helping to drive the First Trust Consumer Discretionary AlphaDEX Fund (FXD) into green territory as well.

A Red Wednesday

The stock market plummeted on Wednesday, with most sectors trading red, as important inflation data revealed higher-than-expected price pressures. The Dow fell 680 points on Wednesday, to have its single-worst session since January. The S&P 500 shed 2.1%, its biggest one-day drop since February, while the tech-heavy Nasdaq Composite tumbled 2.6%, continuing the slide in tech.

The government reported that headline consumer prices rocketed by a quicker than anticipated 4.2% in April. Excluding food and energy, prices jumped 0.9% last month and are 3.0% higher over the year. Adding to the impact, on Thursday, the government’s producer prices number also was higher than expected, with core producer prices climbing 4.1% last month versus the 3.8% gain that was anticipated.

“It’s not a matter of whether inflation is going to be firming over the next couple of months … it will,” Garrett Melson, a portfolio strategist at Natixis Investment Manager Solutions, told Yahoo! Finance on Wednesday.

“The bigger story is whether we’re seeing a persistent and structural shift higher in prices,” he added.

Other analysts also weighed in on inflationary data.

“We do not think that yesterday’s inflation print changes the longer-term case for inflation after the reopening trade, and that is what ultimately matters for markets,” AB Bernstein strategist Inigo Fraser-Jenkins said in a note.

While tech stocks were favorites throughout the pandemic, leading the rise off of the lows, they have been under pressure recently, as investors have driven the Nasdaq lower. The tech-heavy benchmark is the worst performer among the major averages, losing 4% this week. Meanwhile, the S&P 500 and the Dow are still off by over 2% apiece.

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