Stocks are suffering a rare selloff on Tuesday as investors brace for President Trump’s first speech to a joint session of Congress. A definite “risk off” smell is in the air after Monday’s rally to new highs represented the longest-ever run of consecutive records. As you know, breadth has been narrow, the advance has been led by “defensive” stocks in areas like utilities lately, and sentiment measures are off-the-charts extreme.
No surprise then that the CBOE Volatility Index (INDEXCBOE:VIX) is pushing up and out of its upper Bollinger band for the first time since late October as traders scoop up protection against a sustained downside move.
With the Dow Jones Industrial Average’s record uptrend at risk, the narrow group of stocks that have been powering it higher look vulnerable to a nasty pullback as the air pocket of momentum-chasing and momentum-buying suddenly collapses.
Here are three Dow titans that have led the charge higher, but are now looking shaky:
Vulnerable Dow Jones Stocks: Boeing (BA)
Boeing Co (NYSE:BA) shares have climbed by a third since before the election, surging on hopes of increased defensive spending under President Trump, a deep order backlog as airlines expand capacity, and solid earnings results. Back in January, the company reported earnings of $2.47 per share (14 cents ahead of estimates) on a slight decline in revenues.
The company will next report results on April 26. The company is expected to report earnings of $2.03 per share on revenues of $21.82 billion. Possible catalyst for a pullback would be resistance to Trump’s defensive spending plans, ongoing pushback on weapon acquisition costs (Trump recently criticized Boeing for the cost of replacing the Air Force One fleet) and the approach of the debt ceiling limit in March.
Vulnerable Dow Jones Stocks: Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) shares have surged more than 11% from their January low, zooming to test the high from July, as investors have piled into the health care icon amid a focus on more defensive issues.
There hasn’t been any identifiable catalyst for the move, if anything Trump represents a headwind for the pharmaceutical and biotech industries considering his public railing against high costs.
Edge Pro subscribers recently enjoyed a 168% gain trading the March $115 JNJ calls. The company will next report results on April 25 before the bell. Analysts are looking for earnings of $1.76 per share on revenues of $17.99 billion.
Vulnerable Dow Jones Stocks: 3M (MMM)
3M Co (NYSE:MMM) shares have extended powerfully in February, rising roughly 8% to push to new highs and break out of a trading range going back to July with resistance near $179.
The upside extension has stretched already high valuations, something analysts at Stifel highlighted in late January. Revenue growth last quarter was tepid, up just 0.4% from prior year.
The company will next report results on April 25 before the bell. Analysts are looking for earnings of $2.06 per share on revenues of $7.47 billion.