The slow slog of the U.S.-China trade deal hampered stocks Wednesday, sending all three of the major domestic equity benchmarks lower on the day.
- The S&P 500 shed slid 0.3%
- The Dow Jones Industrial Average retreated 0.4%
- The Nasdaq Composite tumbled 0.5%
- Johnson & Johnson was one of the lone bright spots in the Dow Jones today, adding 0.8%
When it comes to the trade wranglings, at least two prominent themes are hindering stocks. First, the sheer amount of time it’s taking to get a deal done. Phase I of the trade accord was supposed to be settled earlier this month, but now it looks like Dec. 15 is the target date.
However, that’s far firm.
Second, there are dueling views on the state of the talks themselves. Some market observers view the situation as sanguine, while others see plenty of tensions lingering.
“Some people close to the talks describe them as being in a sensitive, make-or-break stage and caution that what President Donald Trump proclaimed as a done deal a month ago, sending U.S. stocks soaring to records, could still easily fall apart,” reports Bloomberg.
Those competing views and frequent postponements have created an aura of uncertainty. The markets dislike this uncertainty, as reflected by the fact that just nine Dow components were higher in late trading.
Some Juice For JNJ
Johnson & Johnson (NYSE:JNJ) was the leader of the Dow today. Shares of JNJ were boosted after Cantor Fitzgerald analyst Louise Chen initiated coverage of the stock yesterday with an “outperform” rating and a $160 price target.
“Upwards earnings revisions to JNJ’s Pharma business and multiple expansion…driven by diminishing headlines risks from talc and opioids, should move shares higher,” said the analyst.
JNJ has been a Dow laggard this year, as it has been hampered by fears of opioid-related litigation costs. But investors may have over-exaggerated those fears. As Chen notes, the company’s pipeline offers room for growth.
An Interesting Day For Oil
Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) — the two largest U.S. oil companies — were among the Dow Jones winners today, mainly because domestic inventories data showed a smaller than expected increase.
That’s a credible catalyst, but the strength in shares of Exxon is arguably surprising because Moody’s Investors Service lowered its credit rating on the oil giant, citing “cash burn” concerns.
“ExxonMobil’s negative outlook reflects the company’s substantial negative free cash flow and expected reliance on debt to fund its large growth capital spending program,” said the ratings agency. “The company’s high level of growth capital investments cannot be funded with operating cash flow and asset sales at projected levels given ExxonMobil’s substantial dividend payout.”
The dividend is one of the primary reasons investors have stuck by Exxon stock and the company may be loathe to cut it.
Plenty of Offenders
Home Depot (NYSE:HD) followed up yesterday’s 5.4% tumble with a slide of 2.2% today after rival Lowes (NYSE:LOW) reported decent quarterly results that sent that stock higher by nearly 4%. Looming Black Friday promotions and the rest of the holiday shopping season stand as tests for both home improvement retailers.
Bottom Line on the Dow Jones Today
While trade will continue commanding headlines over the near term, it may take a step back Thursday simply because several marquee economic data points are due. In addition to a broad swath of retailers reporting earnings (no Dow components), the Philadelphia Federal Reserve manufacturing index for November will be reported along with October’s existing home sales.
“Economists are estimating 5.46 million U.S. homes sold in October, according to Dow Jones. This is after U.S. home sales unexpectedly fell to 5.38 million in September, following two months of gains,” according to CNBC.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.