Following Tuesday’s modest declines, the major U.S. equity benchmarks did more of the same Wednesday, falling slightly as oil prices slid and President Donald Trump continued lobbing harsh trade rhetoric at China.
Trump said he has no interest interest in a deal with China unless the world’s second-largest economy agrees to honor what the U.S. president believes was previous commitment to honor certain terms of a trade accord.
“We had a deal with China and unless they go back to that deal, I have no interest,” said Trump.
Trump’s trade talk has been a common theme for investors to contend with in recent weeks, and with the G-20 summit looming later this month, market participants are likely hoping the president backs off the hostilities aimed at China.
With trade tensions at the forefront of many investors’ minds, the losses of 0.38% and 0.2% for the Nasdaq Composite and the S&P 500 today were tolerable. The Dow Jones Industrial Average finished lower by 0.17%. Reflecting the day’s lethargy, exactly half the Dow’s components were up in late trading while half were in the red.
Not A Lot Of Big Gainers
In late trading, just four of the Dow’s 30 names were up more than 1%. The leader of that pack was industrial conglomerate United Technologies (NYSE:UTX), which earlier this week revealed a controversial bid acquire rival Raytheon (NYSE:RTN) for $121 billion.
What is curious about Wednesday’s positive price action in United Technologies is that the stock rose against the backdrop of some well-known hedge fund managers saying they plan to oppose the company’s bid to acquire Raytheon. Pershing Square’s Bill Ackman went so far as to say he would publicly oppose the deal if necessary. Dan Loeb’s Third Point, another hedge fund with a position in United Technologies, also voiced opposition to the deal.
Sticking in the aerospace and defense arena for a moment, shares of Boeing (NYSE:BA), the Dow’s largest component, slipped Wednesday. The company is a massive U.S. exporter, meaning its stock could be under scrutiny leading up the aforementioned G-20 summit on June 28-29.
“President Donald Trump is expected to meet Xi Jinping, China’s president. Boeing’s stock could jump if something positive is said about a trade deal after the meeting,” reports Barron’s.
It was a good day for blue-chip healthcare stocks as three of the Dow’s four names from that sector traded higher, led by Johnson & Johnson (NYSE:JNJ). The healthcare sector, the second-largest sector weight in the S&P 500, has been a dud for most of this year, but the group recently caught a bid as investors embraced defensive sectors.
The trade makes sense because even large healthcare companies like JNJ have little exposure to foreign markets that are at the center of Trump’s various trade conflicts. For its part, JNJ is on a seven-day winning streak, meaning the stock has closed higher in seven of June’s eight trading days.
Bottom Line on the Dow Jones Today
As has been previously noted in this space, investors would do well to not overreact one way or other to one day of market movement. That said, it is worth considering that nine of the 15 Dow stocks that traded higher today, including JNJ, would be considered defensive names.
Another name from that group is McDonald’s (NYSE:MCD), which is setting a torrid second-quarter pace, up almost 12% since the start of April.
Absent contributions from the energy and technology sectors and with trade tensions still running high, the Dow’s defensive names continue to offer some allure for investors looking to remain engaged with equities while attempting to keep volatility at bay.
As of this writing, Todd Shriber did not own any of the aforementioned securities.
