Should you invest in a hedged ETF?

By Philip van Doorn

Also: The rebound in the stock market, dividend stocks ahead of the Fed's rate cuts and full coverage of Lumen

Investors have had a bumpy ride in the stock market lately. Over five trading sessions through Wednesday, the S&P 500 fell 5.9%, before reversing course on Thursday with a 2.3% increase.

The 3% drop for the S&P 500 SPX on Monday wasn't any fun, especially following declines over the previous two sessions. How did you feel? Were you having difficulty sleeping? If so, you might consider an exchange-traded fund that offers downside protection.

In this week's ETF wrap, Isabel Wang explained how buffer ETFs work and what you might sacrifice in return for protection when the stock market slides.

On a related note, Beth Pinsker offered advice to investors trying to time the stock market by moving their money in and out.

Take advantage: These five value stocks are already cheap - and they're on sale right now

Mixed views of the late-week rally

With stocks rising early Friday following their upward turn Thursday, Keith Lerner of Truist Advisory Services suggested investors load up again on technology stocks, after having warned in June that they were overheated.

But Lawrence G. McMillian used technical analysis to highlight additional short-term risks for stock prices.

More: Stocks still vulnerable to further unwind of yen carry trade, strategists say

Dividend stocks that might shine when the Fed cuts interest rates

Last week's report of an increase in the U.S. unemployment rate to 4.3% in July from 4.1% in June helped spark the stock-market selloff - as well as talk of recession and the possibility of a more aggressive cycle of interest-rate cuts by the Federal Reserve than had been expected.

When interest rates go down, bonds' market values tend to rise. The anticipation of this action explains the inverted yield curve, with 10-year U.S. Treasury notes BX:TMUBMUSD10Y yielding 3.93% Friday morning, while three-month Treasury bills BX:TMUBMUSD03M were yielding 5.23%.

Stocks of companies that pay dividends can exhibit similar price movements to bonds when interest rates decline. Mark Hulbert listed 24 dividend-paying stocks primed for a Fed rate cut in September.

More from Hulbert:

20 stocks the bears can't easily short - and that's why you shouldn't buy themThese 15 stocks are likely to soar when the bull market rebounds

Beware: Fed rate-cut fervor is gripping Wall Street again. That could set up markets for another trap.

Lumen is a hot stock

Shares of Lumen Technologies Inc. (LUMN), which changed its name from Century Link in September 2020, were up 72% in August through Thursday. Then again, the stock was down 39% for 20 years, with dividends (which the company stopped paying in 2022) reinvested.

So what is going on with this legacy telecommunications services provider? Quite a lot. Emily Bary explained how new contracts had helped lift Lumen's stock, and why more good news may lie ahead.

Ciara Linnane covered the rally for Lumen's bonds, with a warning from an analyst.

More coverage: Lumen's stock soars further as fiber company boosts forecast on key metric

Other bond-market news

Another interesting bond-market item this week came from Meta Platforms Inc. (META), which priced $10.5 billion in new debt offerings, including one with 40-year maturity.

Joy Wiltermuth covered the high level of volatility for bond prices and how some investors were getting over their jitters.

Another mess for the Moneyist

This week Quentin Fottrell - the Moneyist - stepped into a family squabble, in which a man setting up an estate plan said he wanted all of his money to be left to one of his two children. The other child was trying to thwart the plan.

More from the Moneyist:

'He does not manage his own bills': My brother is about to take Social Security. Should we put his inheritance from our father's estate into an annuity?'He doesn't want to help': My mother took out a student loan during her marriage. Is my stepfather on the hook?

What is going on with Super Micro?

Late on Wednesday, Super Micro Computer Inc. (SMCI) reported $5.31 billion in sales for its fiscal fourth quarter ended June 30. Sales were up 38% from the previous quarter and up 143% from the year-earlier quarter. But the company's stock fell 20% on Thursday, and it wasn't only because its quarterly profit came in lower than analysts had expected.

Therese Poletti explained why investors were worrying about Super Micro.

Mixed results for dueling weight-loss-drug giants

Shares of Eli Lilly & Co. (LLY) were up 1.6% for one week through Thursday. But Novo Nordisk A/S (NVO) - Lilly's main competitor among manufacturers of GLP-1 weight-loss medications - saw a 3.2% one-week decline for its American depositary receipts.

Here is coverage of the rivals' financial reports:

Eli Lilly's Mounjaro and Zepbound sales lead to a big profit beatOzempic maker Novo Nordisk misses profit estimates as it builds out capacity

Eleanor Laise looked into a potential new use for Novo Nordisk's GLP-1 medication.

Read: These stocks join Meta and Eli Lilly as the biggest winners this earnings season

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-Philip van Doorn

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08-10-24 0512ET

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