Stocks traded solidly higher for most of Tuesday, but lost steam in the afternoon as Wall Street reacted to a big swing in the cryptocurrency.
Earlier today, crypto exchange Binance said it plans to buy rival FTX’s non-US assets amid liquidity concerns at the latter firm. The news sent the price of Bitcoin tumble 12.6% to $18,184 (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.).
“Today is a bad day in crypto. Binance had to step in to save Sam Bankman-Fried’s FTX crypto exchange,” said Edward Moya, senior market strategist at currency data provider OANDA. “This is a huge setback for many crypto investors who have been watching [Bankman-Fried] as a white knight and one of the leaders in the space that was supposed to thrive once we got past this crypto winter. Coinbase Global (COIN (opens in new tab)-10.8%) and online trading platform Robinhood Markets (CAP (opens in new tab)-19.0%).
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The headlines created a whirlwind afternoon for the markets, with the Nasdaq Composite swung from a nearly 2% gain in early trading to a 0.9% loss by midday. The price action stabilized in the final hour of the session, with the technology-heavy index ending up 0.5% at 10,616. The wider S&P 500 Index rose 0.6% to 3,828, while the blue-chip Dow Jones Industrial Average outperformed (+1.0% on 33,160) than Amgen (AMGN) (opens in new tab)) added 5.6% on a well-received update to its obesity drug.
Low-Volume ETFs to Consider Beyond the Mid-Term
Today’s early gains came as midterm elections were held across the country. And history suggests that the stock market may continue to rise over the next few weeks. “Post-election, we would expect a small rise in the stock market over the next month (+1%) – assuming that the consumer price index printed on Thursday is not ‘hot’,” says Wells Fargo analyst Chris Harvey .
Although it will likely take weeks to find out the full results of the midterms, most expect Republicans to win control of the House of Representatives. Harvey says that if we see a “red wave” — where the GOP gains control of both the House and the Senate — defense stocks should continue to do well. This includes companies in the consumer goods and healthcare sectors. Harvey also says a red wave could be beneficial for low-volatility strategies, which have tended to see strong relative performance after previous elections where Republicans took control of Congress.
For investors looking to add defensive positions to their portfolio, here are 10 low-volatility exchange-traded funds that offer an inexpensive way to provide stability amid the market’s twists and turns. Look at them.