After surging yesterday, stocks extended those gains Wednesday as traders continued embracing the notion that interest rate cuts are possible later this year and that the Federal Reserve will do what it can to support the economy of signs of weakness appear.
The Nasdaq Composite and the S&P 500 added 0.64% and 0.82% while the Dow Jones Industrial Average rose 0.82%. One source of strength came by way of the service sector from the Institute of Supply Management (ISM). The May ISM report checked in at 56.9, up from 55.4 in April and above the average reading this year of 57.
As has been noted here in recent days, the Dow Jones Industrial Average is a price-weighted index, meaning the stocks with the largest price tags command the largest weights in the benchmark and it is those names that often capture many of the headlines. However, the blue-chip index got some support Wednesday from some its mid-level members as several stocks outside the Dow’s top 10 holdings were among the index’s top percentage gainers today.
Sourcing Wednesday Leadership
Coca-Cola (NYSE:KO) was one of the Dow leaders today, jumping 1.56% a day after Morgan Stanley reiterated an “overweight” rating and $55 price target on shares of the world’s largest soft drink maker. Morgan Stanley is more enthusiastic about Coca-Cola than it is about rival Keurig Dr Pepper (NYSE:DPS).
Coca-Cola is a member of the defensive consumer staples. Indicating that investors may not yet fully trust the two-day rebound in stocks following the market’s May doldrums, two of the Dow’s other marquee consumer staples names — Walmart (NYSE:WMT) and Procter & Gamble (NYSE:PG) — joined Coca-Cola among the index’s top four percentage gainers Wednesday.
Shares of Walmart, the largest U.S. retail store, climbed 1.8% even after CEO Doug McMillon said at the company’s investor meeting that the U.S. government needs to raise the minimum wage and that the current minimum hourly rate of $7.25 is too low.
Procter & Gamble added 1.96% after the Ohio-based company said it will test environmentally friendly pod refills of Olay Regenerist Whip later this year. There was probably more to P&G’s Wednesday than that announcement, with the “more” being investors favoring defensive names.
Boeing (NYSE:BA), the largest Dow stock, gained 1.23% on reports the company is in talks with unidentified Chinese airlines to possibly deliver an order for about 100 of its wide-body 787 Dreamliners and 777X passenger jets. The deal could be worth $30 billion.
Walt Disney (NYSE:DIS), the Dow’s tenth-largest member, gained 0.81% after Bernstein analyst Todd Juenger reiterated a “market perform” rating and $133 price target on the stock.
Bottom Line on the Dow Jones Today
Three trading days into June, a historically rough month for stocks, and the Dow has traded higher twice. That is some of the good news. But there are some potentially concerning areas, including the ADP private payroll for May. That report showed the addition of just 27,000 private sector jobs last month, well below economists’ forecast of 185,000 new jobs.
“The reality is job growth is slowing, notably slowing, but in the scheme of things, it’s still strong,” said Mark Zandi, chief economist at Moody’s Analytics.
As Wednesday’s price action suggests, stocks can absorb one disappointing data point and climb higher, but with trade wars still raging, equity markets cannot afford a spate of lethargic economic data.
As of this writing, Todd Shribed did not own any of the aforementioned securities.