Just when it looked like the major U.S. equity benchmarks were poised to snap out of their recent doldrums, market participants sold modest early session gains, sending the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 slightly lower in the afternoon, but buyers rallied late in the day to send all three indexes slightly higher.
The S&P 500 and Nasdaq Composite added 0.21% and 0.27%, respectively, while the Dow Jones Industrial Average rose by 0.17%. Eighteen Dow members finished higher Thursday, a day after just three closed up.
Careful What You Wish For
These should be the ideal days for investors to embrace defensive sectors, but some supposedly low-volatility names are betraying that reputation. As was noted in this space yesterday, the strong dollar is hampering consumer staples stocks.
Walgreen Boots Alliance (NASDAQ:WBA) was the second-worst performer among the 30 Dow stocks Thursday, shedding 2.1%. The company, one of the largest pharmacy operators in the U.S., is in the midst of a cost-cutting effort that could see up to 200 of its Boots stores shuttered, but investors are not responding positively to that news.
Shares of the drug store giant now reside nearly 42% below the 52-week high, putting the stock in bear market territory two times over, and Walgreen Boots Alliance currently trades uncomfortably close to its 52-week low.
Verizon Communications Inc. (NYSE:VZ) was the worst offender in the Dow today, sliding 2.3% after UBS downgraded the high-yielding telecommunications giant to “neutral” from “buy.” UBS analyst John C. Hodulik reiterated a $59 price target on the stock, implying modest upside from Thursday’s closing levels.
“Hodulik said that potential industry consolidation and the adoption of 5G technology might provide some upside to the shares, but any such benefit ‘appears partially priced in,” according to Barron’s.
Apple (NASDAQ:AAPL), one of the Dow’s largest components, traded slightly lower on speculation that if China decides to use rare earths metals as a weapon in the trade war against the U.S., smartphone makers could be constrained by limited supplies.
China dominates the market for rare earth metals and those metals are primary components in an array of consumer electronics, such as smartphones and tablets. Fears of crimped rare earth exports come as Apple is getting ready to unveil yet another iPhone.
“So even a short term action affecting production could have longer term consequences for the company,” said Goldman Sachs, according to Barron’s.
Bottom Line on the Dow Jones Today
For equity investors, it feels like there is nowhere to run to and nowhere to hide this month, but some familiar sectors are providing shelter from trade war storms. No the, real estate and utilities sectors, neither of which have any representation in the Dow, are not considered adventurous fare.
However, the Utilities Select Sector SPDR (NYSEARCA:XLU) and the Vanguard Real Estate ETF (NYSEARCA:VNQ) are up modestly higher this month while the S&P 500 is down 5%.
In terms of individual names to consider, Dow component Cisco Systems (NASDAQ:CSCO) is down more than 5% this month, but that may be a case of the baby being thrown out with the bathwater.
In a note out Thursday, JPMorgan reiterated an “outperform” rating on Cisco, reminding investors about the company’s relatively light China exposure. The stock yields 2.6%.
“Cisco remains our top pick for investors looking at safe havens in the current environment to navigate through the trade war noise,” according to JPMorgan.
Todd Shriber does not own any of the aforementioned securities.
