Stocks Rebound and Finish Higher After Debt Ceiling Offer

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Congress kicked the debt ceiling can down the road a bit on Wednesday, reversing the market’s fortunes today by turning a more than 1% plunge for the major indices into slight gains. Meanwhile, a better-than-expected ADP employment report was a nice beginning to three consecutive days of jobs data.
The market may have been a tad more concerned about the debt ceiling problem than it was letting on. Investors were pretty sure that a deal could be worked out before Treasury Secretary Janet Yellen’s October 18 deadline. But, hey, this is Congress! You never really know.  
So news of a short-term debt ceiling extension was applauded by stocks. Now Washington has through November to get something done and keep the U.S. from defaulting on its debt for the first time in history. As a result, stocks recovered from a more than 1% plunge in the afternoon and finished with small gains.
The NASDAQ rose 0.47% (or about 68 points) to 14,501.91, while the S&P climbed 0.41% to 4363.55. The Dow advanced 0.30% (or around 102 points) to 34,416.99.
Those results are a whole lot better than the declines from earlier in the session (which included a more than 450-point plunge for the Dow), and marks a second consecutive day in the green. The S&P and Dow are both up for the week more than halfway through, while the NASDAQ has yet to recover from its over 2% drop on Monday.
In other news, the ADP employment report, which had been a disappointment in recent months, easily beat expectations as we prepare for a deluge of jobs data. Private payrolls added 568,000 last month, compared to expectations of only 425K. It was a nice improvement from the previous print of 374K, which drastically missed expectations of more than 600K.
Tomorrow is Thursday, so we’ll be getting jobless claims as usual. But the main event comes on Friday with the Government Employment Situation report. And shortly thereafter a new earnings season begins…
Today’s Portfolio Highlights:
Marijuana Innovators: Cannabis stocks are going through a rough stretch at the moment, so Ben decided to add a stock on Wednesday that is a well-known and rather boring pick that will provide the portfolio with some stability. That new buy is Innovative Industrial Properties (IIPR), a real estate investment trust focused on properties leased to experienced, state-licensed operators for medical-use cannabis facilities. The stock climbed in recent months as cannabis stocks continually dropped. Furthermore, it continues to sign large legal U.S. cannabis growers to long lease agreements. IIPR also provides the service with income, as it keeps raising its dividend and boasts a 30-year U.S. Treasury-topping yield. Read the full write-up for more on this new addition. By the way, this portfolio had the best performer among all ZU services today as Jazz Pharmaceuticals (JAZZ) rose 6.9%.
Counterstrike: “Two pieces of news swung the momentum. First, GOP Senator Leader McConnell offered a short-term debt ceiling extension that would run into December. This kicks the can down the road, BUT we have more time to make everyone happy and agree on something.
“Next, we had the China/Tawain risk taken away. Beijing had some comments that they will respect the Taiwan Relations Act. Additionally, Biden and Xi will have a digital meeting in the near future. This is great progress and the first step in improving relations.
“Taking away those two risks was worth about 40 handles of upside in the SPX. Not an Earth-shattering move, but we will take it.”
— Jeremy Mullin
All the Best,
Jim Giaquinto

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