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Stocks looked poised to extend their daily losing streak Tuesday, trading lower near the open after a surprise move by the Bank of Japan (BoJ). However, they moved higher by mid-morning as bargain hunters swooped in. Following four days in which the major market indexes notched losses ranging from 4% to more than 6%, they finally managed a win today.
It wasn’t an easy win, though. Stocks initially reacted negatively after the Bank of Japan said it will let the yield on its 10-year government bond reach 0.5% – double the previous cap of 0.25%. Although the central bank left its short-term rate at negative 0.1%, today’s move left many wondering if the BoJ, known for its ultra-loose monetary policy, could be ready to follow in the footsteps of its global counterparts and begin to hike interest rates in order to combat inflation.
“There has been quite a bit of speculation building that the BoJ would be forced to ease off its ultra-accommodative policy stance with most believing this would occur after the end of Governor Kuroda’s term in March,” says Michael Reinking, senior market strategist at the New York Stock Exchange. “This was a modest step in that direction, but the biggest surprise was really the timing.”
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Back at home, the Commerce Department said this morning that construction on new homes slipped just 0.5% in November to 1.43 million homes. On the other hand, building permits for new homes plummeted 11.2% to 1.34 million.
“With historically low home affordability driven by real estate price increases and higher mortgage rates, many Americans have been priced out of homeownership and builders have responded by cutting construction and slowing permitting requests for new projects,” says José Torres, senior economist at Interactive Brokers. “Builders are also hard pressed to acquire financing with banks tightening their loan standards and seeking to protect themselves from a potential recession.”
The major indexes finished the day higher, with the Dow Jones Industrial Average adding 0.3% to 32,849, the S&P 500 Index rising 0.1% to 3,821, and the Nasdaq Composite eking out a marginal gain to 10,547.
Stay Active and Nimble in 2023
Investors will need to stay active and nimble in 2023, with a focus on fundamentals, says Tony DeSpirito, chief investment officer at BlackRock’s U.S. Fundamental Active Equities. “Stocks look set to continue their stutter-step motion into 2023 after a downbeat and extremely volatile 2022,” DeSpirito writes in his Q1 2023 equity outlook. But there is hope for investors, and the speedbumps we’ve seen over the past 12 months – and will likely see moving forward – are “not uncommon on the path to solid longer-term returns,” he adds.
The key to success is being opportunistic as well as defensive, with a focus on quality characteristics and positions, DeSpirito says. One way to do this is with the best dividend stocks, such as the Dividend Kings, which have raised their annual payouts for at least 50 years straight. There are also plenty of high-yield options at investors’ disposal. For those looking for a diversified approach to income investing, these are the nine best high-yield ETFs, boasting yields at least double that of the S&P 500.
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