The major U.S. equity indexes extending their winning streaks Monday as stocks rallied on news that the U.S. and Mexico are averting a tariff crisis and intensifying speculation that following last Friday’s slack May jobs report, the Federal Reserve could cut interest rates later this year.
To start the week, the S&P 500 climbed 0.47% while the Nasdaq Composite added 1.05%. The blue-chip Dow Jones Industrial Average extended its winning ways, jumping 0.3% on Monday.
In late trading, more than two-thirds of the Dow’s 30 components were trading higher. Industrial conglomerate United Technologies (NYSE:UTX), however, was not one of those names. The defense contractor tumbled over 3% on more than triple the average daily volume on news its is looking to acquire rival Raytheon (NYSE:RTN) in a deal valued at $121 billion.
United Technologies recently announced plans to spin off its elevator and heating and air conditioning businesses, prompting some market observers to characterize the offer for Raytheon, in which United Technologies is offering 2.33 shares for each Raytheon, as unusual. However, Seaport Global raised its rating on United Technologies to “buy” from “neutral” today.
Additionally, there is already speculation that the Donald Trump Administration, which has been mostly friendly toward the aerospace and defense industry, has antitrust concerns about the potential marriage of these two companies.
“The deal will be reviewed by either the Justice Department or the Federal Trade Commission to ensure that it complies with antitrust law,” according to Reuters.
Fun With Financials
Financial services is the third-largest sector weight in the Dow and the S&P 500, so it was to investors’ benefit to see some of those names contributing to Monday’s upside. In late trading, three of the Dow’s top four percentage gainers were financial services names.
JPMorgan Chase (NYSE:JPM), the largest U.S. bank, rose 1.06% after CEO Jamie Dimon, one of the most widely voices in the banking industry, compared his company to Netflix (NASDAQ:NFLX) in a recent Barron’s interview.
Dimon told the financial magazine that the bank has a lot of “subscription-like businesses” and that its earnings volatility, over time, is low. He added that the bank plans to boost its dividend following the release of the Fed’s stress test results.
Goldman Sachs (NYSE:GS), the largest financial services stock in the Dow, was the blue-chip index’s top percentage gainer today, adding 2.26%. Aside from reports that Goldman was Saudi Arabia’s leading brokerage firm last month, there was not a lot of company-specific news pertaining to the name today.
On essentially no news other than its home sector and the broader market climbing, American Express (NYSE:AXP) added 1.3% to hit a new 52-week high. The stock is up more than 27% year-to-date.
Bottom Line on the Dow Jones Today
For investors tired of tariff talk, Monday brought a step in the right direction as the U.S. and Mexico continued making nice on the trade front. How, or if, this affects the U.S./China trade dispute is another matter altogether.
On Monday, President Trump threatened to levy more tariffs on Chinese imports if his counterpart, President Xi Jinping, does not attend the G-20 meeting in Japan later this month. Trump believes the two sides will eventually reach some type of trade deal and that the U.S. tariffs on Chinese imports will be the catalyst for getting that deal done.
Trump added that it was the threat of tariffs that facilitated a favorable outcome with Mexico on trade. The president also renewed his criticism of the Fed, stoking speculation that the central bank will acquiesce to the president’s comments and lower interest rates this year.
As of this writing, Todd Shriber did not own any of the aforementioned securities.