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The DJIA Index added 33 points Friday to end a four-day losing streak. The cause? Biotech and healthcare stocks rebounded to pull markets upward as investors search for value after this week's sell-offs.
Federal Reserve Chair Janet Yellen gave a speech on monetary policy in San Francisco 15 minutes before the closing bell. Yellen indicated that rate increases this year are likely, but the pace will be gradual.
Dow: 17,711.26, +33.03, +0.19%
S&P 500: 2,060.97, +4.83, +0.24%
Nasdaq: 4,891.22, +27.86, +0.57%
The S&P 500 Volatility Index (VIX), the market's fear gauge, slipped roughly 4% on the day.
What Moved the Stock Market Today: The Nasdaq Biotechnology Index (Nasdaq: NBI) jumped more than 1.7% on the day after four consecutive losing sessions. Meanwhile, economic data released today came in lower than expectations. Consumer sentiment fell month-over-month in March. The U.S. Commerce Department stated that the final reading for GDP in the fourth quarter of 2014 came in at 2.2%, lower than economists' projections of 2.4%. This raises concerns about economic momentum heading into the first quarter of 2015.
Energy stocks were the worst-performing sector as oil price volatility continues to hammer markets. Crude prices slumped as analysts dismissed concerns about violence in Yemen and the markets took into consideration the very real possibility that the United States could announce a nuclear arms deal with Iran in the next few days. Brent oil fell 5.3% today as speculation grows that Iranian production could reenter the market in the coming months. Oversupply concerns also continue to pound the U.S. energy sector. May 2015 WTI crude futures contracts fell nearly 6% on the day.
Now, check out the other top market stories – plus get our new profit tip for investors:
- Energy Slump: The troubles continued for large multinational oil companies today after crude prices slumped. Shares of Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) fell nearly 1%, while Royal Dutch Shell (NYSE: A) shares slipped 1.4%. But smaller, independent energy producers took the hardest lumps. Shares of Rex Energy Corp. (Nasdaq: REXX) fell 8.3%, Magnum Hunter Resources Corp. (NYSE: MHR) fell 9.7%, and Energy XXI Ltd. (Nasdaq: EXXI), the sector's worst performer, lost 13.3% on the day.
- Spin-Off Surge: Shares of Dow Chemical (NYSE: DOW) jumped 3.2% on news it will spin off a portion of its chlorine production unit, which will then merge with Olin Corp. (NYSE: OLN). Shares of Olin jumped 14% on the day. Dow Chemical has been under pressure from activist hedge fund Third Point to break up its petrochemical business from its specialty chemicals unit.
- Earnings Beat: Shares of BlackBerry Ltd. (Nasdaq: BBRY) gained nearly 2.7% this afternoon on news that the company reported a profit in the fourth quarter. However, the company's revenue was well below expectations. It's mixed news to investors, but in Blackberry's case, it's "positive" for a tech company during its turnaround efforts. Overall, the company reported a $28 million profit, which registered at $0.05 per share.
- Buyback Time: Shares of Yahoo! Inc.(Nasdaq: YHOO) rose more than 2% today after its received board approval to boost its share buyback program by an additional $2 billion. The news was reported in a filing with the Securities and Exchange Commission. The company has been under fire from activist hedge fund investors to return cash to its shareholders or to consider asset purchases thanks to the windfall produced by its Alibaba Group Holding Ltd. (NYSE: BABA) stake.
Today's tip comes from Money Morning Chief Investment Strategist Keith Fitz-Gerald:
Reinvesting dividends is the practice of buying additional shares of a stock using the dividends themselves to pay for your purchase. It results in long-term compounding, and that's key to building a fortune.
Let's use Altria Group Inc. (NYSE: MO), a high-yield dividend stock, as an example. Last September, Altria boosted its dividend for the 48th time in the last 45 years. Shares yield 4.11%.
While that's fabulous for any investor, some have made out like bandits. Depending on when they originally purchased shares, they've had the chance to receive more in dividends than they originally paid for the stock itself. Which means, practically speaking, they own the stock for "free."
Over time, the difference between simple appreciation and the effects of continual dividend reinvestment is jaw-dropping.
Had you invested in MO stock on Jan. 2, 1970, and left that money alone until the close of trading on Sept. 2, 2014, your return would be 431,800%, adjusted for dividends and stock splits.
Many companies even offer dividend reinvestment plans (DRIPs) as a means for investors to purchase shares over time. Investors can start with a small number of shares and, instead of receiving dividends as cash, reinvest continually in the company's stock.
This achieves two things. 1) It puts the plan on autopilot, and 2) it helps you maximize the effectiveness of dollar-cost averaging over time. You spread your purchases out and never have to lift a finger to do so.
The DRIP strategy isn't a get-rich-quick tactic. But for investors with an eye toward the long term, its power is unrivaled in transforming modest investments into mega-returns down the road.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.