All it took was a little love on the trade front to send stocks surging on Tuesday. The Nasdaq Composite and the S&P 500 rallied 1.39% and 0.97%, respectively, with the latter closing in on another record in advance of the Federal Reserve meeting. The Dow Jones Industrial Average, meanwhile, added a respectable 1.35%.
Finally, a tweet from President Trump involving trade talks proved efficacious for stocks. In a tweet out earlier today, Trump said he and Chinese President X had a “very good” conversation via telephone and that the two are “extended meeting next week at the G-20 in Japan.” Trump added that representatives from both sides will hold talks prior to the two leaders getting together.
The stage is set for stocks to continue climbing, particularly if the Federal Reserve cooperates. The U.S. central bank commenced its two-day meeting today. While it appears unlikely that the Fed will announce an interest rate cut tomorrow, what will captivate investors’ is language that could imply a rate cut is imminent, perhaps as soon as July.
Those are the types of headlines that riskier assets love. In late trading, more than two-thirds of the Dow’s 30 components were in the green, but a few were sporting particularly robust gains. Let’s look at a few here.
Boeing (NYSE:BA), a frequent guest in this space and the Dow’s largest component, surged 5.50% today, an encouraging sign because it is good to see the big kahuna rally in a price-weighted index like the Dow. Yesterday, it was noted that Boeing was making some bullish predictions at the Paris Airshow.
That theme continued today when the company said that British airline group IAG inked a deal to buy 200 of Boeing’s 737 max jets. Yes, that’s the same 737 max passenger jet that has recently caused Boeing investors so much consternation. IAG owns British Airways, Aer Lingus and Spain’s Iberia, among other European carriers. The deal could be worth up to $24 billion.
Industrial conglomerate 3M Co. (NYSE:MMM) is the epitome of a cyclical stock that has been battered by the trade war. Shares of 3M are saddled with a second-quarter loss of 20% and the stock has been careening lower since late April.
3M, which has a dividend yield of 3.45%, got some relief today, climbing 2.98%. As is the case with Boeing, 3M’s rise is particularly good news for the price-weighted Dow because Minnesota-based 3M is the eighth-largest component in the price-weighted index.
“We believe the market has overreacted to two key variables: 1) 3M’s latest guidance cut; and 2) 3M’s potential PFAS litigation exposure,” said Morningstar in a recent note.
“Since Mike Roman has been at the helm for nearly a year, 3M has been forced to cut guidance on five different occasions. That said, 3M consists of short-cycle businesses that are notoriously hard to predict. Most of the slowdown has come from three distinct end markets which make up over 30% of its revenue base, which include automotive, electronics, and China. And the company simply missed reacting to slowing demand.”
As has been widely documented, semiconductor stocks have been primary victims of the trade controversy. What was once one of the year’s best-performing groups rapidly turned south in May, but the anti-semiconductor trade probably got too crowded too quickly, giving way to a snap-back rally.
After gaining 2.74%, Intel was the Dow’s best-performing technology stock today.
Athletic apparel and footwear giant NIKE Inc. (NYSEARCA:NKE) gained 2.82% today, probably due in large part to the encouraging news on the trade front. The company is heavily dependent on foreign labor and was previously warned the White House that tariffs on its exports to China would be “catastrophic” for its business. With those factors in mind, it probably was not surprising to see NIKE rank as the best-performing consumer discretionary stock in the Dow today.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
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