Dow Jones Today: We’ve Seen This Movie Before

Advertisement

Stocks meandered lower Tuesday as traders fretted about trade and comments from Federal Reserve Chairman Jerome Powell. Yes, this a movie we’ve all seen before. Technology, the largest sector in the S&P 500, was the worst-performing group today as market participants displayed some jitters ahead of the start of the G20 summit later this week.

The 5 Best Dow Jones Stocks to Buy Now

Source: Shutterstock

With tech stocks weak on the day, the Nasdaq Composite fell 1.51% while the S&P 500 declined by 0.95%. The Dow Jones Industrial Average slipped 0.67% as none of the blue-chip index’s technology components closed higher today.

Comments from various Federal Reserve officials also damped investors’ enthusiasm for riskier assets today. St. Louis Federal Reserve President James Bullard, often one of the Fed’s more vocal members, said it is not likely that the central bank will cut interest rates by 50 basis points next month.

Chairman Powell “said separately that officials were debating whether uncertainty over trade policy will cause the economy to slow and warrant rate cuts later this year,” reports Barron’s.

Translation: with each passing Fed meeting that does not deliver a rate cut of some form, stocks are increasingly vulnerable because today’s price action confirms markets have already baked in a rate cut or cuts.

June Gloom

With today’s broader market losses being on the larger side of things, it is not surprising that in late trading more than two-thirds of the Dow’s components were in the red. Much of that has to do with the increasing number of companies, Dow members or otherwise, that are warning about the toll the China tariffs are expected to have on quarterly results.

Microsoft (NASDAQ:MSFT), which has been one of the Dow’s best-performing names this year, plunged 3.16% today after a Jefferies analyst said the company’s Azure cloud business, will struggle to keep pace with the competing AWS offering from Amazon (NASDAQ:AMZN).

“Azure will probably never see the margin broadly expected due to cultural and technical factors, and a recent unprecedented boost to cash flow from Windows may not persist,” said Jefferies analyst John DiFucci in a note out today.

The analyst has a meager $90 price target on Microsoft, about 33% below where the stock settled today. Microsoft was the worst-performing member of the Dow today on a percentage basis.

Frequent guest of this space Boeing (NYSE:BA), the Dow’s largest component, fell 1.36% today in what was a case of the stock simply following the broader market lower. That’s more a commentary on today’s market weakness than Boeing stock because there was actually some good news about the latter.

More airlines are sticking by Boeing’s 737 MAX passenger jet. That news comes on the heels of the company landing a major order for that plane at the Paris Airshow last week.

Overall, Tuesday’s tea leaves are difficult to read because of the seven Dow stocks that closed higher, just four would accurately be described as defensive, meaning the market was not overtly favoring more conservative fare today. Hence why investors should not make decisions based on a single day of action.

Bottom Line: Some Concerns

What was concerning today was the weakness in the day’s marquee economic reports. For example, the Conference Board’s June consumer confidence reading declined to 121.5, the lowest reading in two years.

“The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence,” Conference Board senior director Lynn Franco said in a statement. “Although the Index remains at a high level, continued uncertainty could result in further volatility in the Index and, at some point, could even begin to diminish consumers’ confidence in the expansion.”

What’s doubly concerning is that Fed officials backed off lowering rates next month on the same day a lethargic consumer-related data point was released. Investors have been led to believe the Fed is data dependent. We shall see if that is the case.

As of this writing, Todd Shriber did not own any of the aforementioned securities.

Todd Shriber has been an InvestorPlace contributor since 2014.


Article printed from InvestorPlace Media, https://investorplace.com/2019/06/dow-jones-today-weve-seen-this-movie-before/.

©2024 InvestorPlace Media, LLC