U.S. stocks traded higher earlier Tuesday after Chinese policymakers revealed support for infrastructure projects, the latest effort by Beijing to keep the world’s second-largest economy on solid footing despite the lingering trade war with the U.S.
However, the major domestic equity benchmarks could not hold those gains and traded progressively lower as the day wore on. When the closing bell range, the Nasdaq Composite and the S&P 500 were lower by 0.01% and 0.03%, respectively. The Dow Jones Industrial Average saw its winning streak snapped as the blue-chip benchmark lost 0.05%.
President Donald Trump continued his trade rhetoric aimed at China and renewed calls for a weaker dollar, though the Invesco DB US Dollar Index Bullish Fund (NYSEARCA:UUP) was mostly flat following those comments.
Trump took to Twitter to say the euro and other major currencies were devalued, putting the dollar at a disadvantage. UUP is up 2.3% this year after the dollar was the best-performing major currency last year, but some data points suggest traders are expecting the dollar to slump in the second half of this year as markets price in rising odds of an interest rate cut.
In late trading on the Dow Jones today, 18 of the 30 members were in the green, though just a handful were higher by 1% or more. Industrial component Caterpillar (NYSE:CAT), the largest maker of construction equipment, was the Dow’s best performer on a percentage basis today. There was not much in the way of company-specific news out Tuesday pertaining to Caterpillar, but the company is sensitive to conversations about things like tariffs and the weaker dollar.
Caterpillar was beaten up in May, but the stock is higher by more than 4% over the past week, an encouraging sign for risk appetite. The stock is trying to work its way out of a bear market (still 19.90% below its 52-week high) and if it can gain another 4.4% to reclaim its 200-day moving average, there could be something to see here.
Shares of Apple (NASDAQ:AAPL) added 1.16% after iPhone supplier Foxconn said Tuesday that is the capability to shift iPhone assembly out of China if needed and that it has capacity in other locations to meet U.S. demand for the popular smartphone. About a quarter of Foxconn’s production capacity is found outside of China.
Apple is now on a six-day winning streak. CEO Tim Cook said last week he does not expect China to overtly target his company as a result of the trade war and analysts seem to think tariff talk as it pertain to Apple is mostly noise.
“The fundamental impact on iPhone production and the potential cost increases are thus far containable with shares baking in a much more draconian/worst-case scenario,” said Wedbush analyst Daniel Ives in a recent note.
As was noted here yesterday, the Dow’s financial services components have been solid recently. While the group did not set the world on fire today, JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS) trader higher on the likelihood of higher dividends from the sector following completion of the Federal Reserve’s stress tests.
“Large bank stocks could go still higher, boosted by double-digit dividend increases expected to be authorized under the Federal Reserve’s Comprehensive Capital Analysis and Review, or CCAR, according to analysts at JPMorgan,” reports Lawrence Strauss for Barron’s.
Bottom Line on the Dow Jones Today: Banks And Burgers?
With dividends poised to rise, revenue streams that rely heavily on the U.S. and surprisingly low volatility, bank stocks, including those in the Dow, are sensible ideas for investors to consider over the near-term.
Add burgers into that conversation as Dow component McDonald’s (NYSE:MCD) continues trading higher. On Tuesday, UBS reiterated a “neutral” rating on the stock, but did boost its price target to $203 from $185. Shares of McDonald’s are up nearly 14% this year, so it is not clear why UBS is not rating the stock a “buy” while raising its price target, but more upside appears imminent for the fast-food giant.
As of this writing, Todd Shriber does not own any of the aforementioned securities.