Dow Jones Today: That Was Not Pleasant

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Amid a batch of earnings reports that were not to investors’ liking, and expectations that the second-quarter GDP number due out tomorrow will signal rapidly slowing growth in the world’s largest economy, stocks stumbled on Thursday.

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Rumors that the European Central Bank (ECB) could unveil substantial monetary stimulus to support sagging Eurozone economies were not enough to support global stocks, either.

“Much of the problem boils down to lackluster expectations about forward growth (the European Central Bank itself recently lowered its 2019 growth expectations in the EU by almost 40%, from 1.7% to 1.1%),” said BlackRock in a recent note.

Here in the U.S., the Nasdaq Composite backed off recent record highs, slipping 1% while the S&P 500 did the same, falling 0.52%. It was a rough day for the Dow Jones Industrial Average, which lost 0.46%. We’ll get into that in a moment.

Lots of Dow Jones Offenders

Unfortunately, Thursday was one of those days where there was no shortage of Dow losers to pick from. In late trading, 18, or more than half of the Dow’s 30 components, were in the red.

Boeing (NYSE:BA), the Dow’s largest member and a regular guest in this space, slid 3.64% after the stock lost 3.15% yesterday. The Federal Aviation Administration (FAA) said today there is no set time frame for Boeing’s 737 Max passenger jet to return to service, rankling a slew of airline stocks and sending those names lower in the process.

As just one example, Southwest Airlines (NYSE:LUV) said it will keep the 737 Max out of service until at least early next year out of an abundance of caution.

Chemicals maker Dow Inc. (NYSE:DOW), another name that has recently spent time in the spotlight, though for positive reasons, sank 3.83% today and was the second-worst Dow performer after Boeing. Dow sank Thursday for a reason that was expected and has been playing a role in a lot of second-quarter earnings calls: weakness in China.

Dow beat second-quarter earnings estimates, but the company said it is paring spending for the rest of the year due to the U.S.-China trade spat and amid a glut of supply in the plastics market.

A real disappointment in the Dow today was industrial conglomerate 3M (NYSE:MMM), which rallied earlier in the session following decent second-quarter numbers, but failed to hold those gains and closed lower by 0.70%. Already one of the Dow’s laggards this year, 3M trade as high as $187.12 today only to close at $178.17.

3M reported a second-quarter profit of $2.20 a share on revenue of $8.17 billion, beating Wall Street estimates of per share earnings of $2.05 on sales of $8.05 billion. The company trimmed its 2019 EPS guidance $8.25 to $8.75 from $8.53 to $9.03, but still expects to earn $9.25 to $9.75 on an adjusted basis.

Dow Bottom Line

Obviously, Thursday’s action was glum, but plenty of tests await investors tomorrow. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Dow component Intel (NASDAQ:INTC), among others, report after the close today.

If any of those stocks and the aforementioned GDP report disappoint, it is reasonable to expect that stocks could trade lower again tomorrow. The upside of a slack economic data point that carries some weight, which GDP certainly does, is that it could give the Federal Reserve the push it needs to lower interest rates at its meeting next week.

There may near-term advantages to establishing defensive positions, but investors should note that many of the sectors that are viewed as defensive and low volatility destinations are currently richly valued.

Todd Shriber does not own any of the aforementioned securities.

Todd Shriber has been an InvestorPlace contributor since 2014.


Article printed from InvestorPlace Media, https://investorplace.com/2019/07/dow-jones-today-that-was-not-pleasant/.

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