Dow Jones Today: The Dow Has a Caterpillar Problem

It was a good day for stocks, for the most part. Particularly for investors focusing on the Nasdaq Composite and the S&P 500.

Source: Pavel Ignatov /
Those two index continued their recent ascents, adding 0.85% and 0.47%, respectively. It was a different ballgame for the Dow Jones Industrial Average, which slumped 0.29%.

The Dow’s Wednesday weakness was largely attributable to a 4.50% loss by industrial machinery maker Caterpillar (NYSE:CAT).  It was one that occurred on more than double the average daily volume. Simply put, Caterpillar’s second-quarter earnings report was a mess.

Caterpillar reported second-quarter net income of $1.62 billion, or $2.83 per share, compared with $1.71 billion, or $2.82 per share, a year ago. Analysts were expecting earnings of $3.11 a share. The company stuck by 2019 earnings guidance of $12.06-$13.06 per share, but said the result will likely be toward the lower end of that range.

Caterpillar admitted its results were hampered by the U.S.-China trade tiff, and while overall demand appears decent, there is no getting around the fact this is a cyclical stock. One that is highly levered to global economic growth trends.

On that front, the International Monetary Fund (IMF) on Tuesday lowered its growth forecast for the fourth time in 10 months.

More Industrial Weakness

Caterpillar wasn’t the only industrial offender in the Dow today. In fact, three of the index’s four components from that sector traded lower Wednesday with 3M (NYSE:MMM) being the only one in the green.

Shares of Boeing (NYSE:BA), the Dow’s largest member, slid 3.15%, after the company said it slowed or temporarily suspend its 737 Max production. Issues related to the now-controversial passenger jet prompted Boeing to report a second-quarter loss of $3.7 billion, its worst quarterly loss ever.

As a result, Boeing’s commercial aviation unit had a $4.9 billion quarterly loss, too much for surging defense, space and security earnings to overcome.

Finally, Some Good News

Shares of semiconductor giant Intel (NASDAQ:INTC) jumped 2.26%, making the stock Wednesday’s best Dow performer on news that fellow Dow component Apple (NASDAQ:AAPL) could buy Intel’s modem chip business. Intel reports earnings tomorrow after the closing bell.

“The company is expected to generate adjusted earnings per share of 89 cents for the second quarter, compared with $1.04 in the year-earlier quarter,” reports Barron’s. “Analysts also estimate sales of $15.7 billion for the quarter that ended in June.”

Visa (NYSE:V) was another Dow winner Wednesday, gaining 1.34% following a strong earnings report. For its fiscal third quarter, Visa reported earnings of $1.37 a share on revenue of $5.8 billion. Analysts were expecting earnings of $1.32 on revenue of $5.7 billion. The company is forecasting 2019 revenue growth in the low double digits.

Dow Jones Bottom Line

A couple of interesting side notes here in the midst of earnings seasons, and yes, we’ll talk about plenty more reports tomorrow. First, ongoing strength in the technology sector is encouraging even as the Justice Department continues probing the dominant market positions of some of the biggest technology companies.

Second, guess what’s coming up next week? Another Federal Reserve meeting. Currently, markets are pricing 100% odds that the Fed will lower rates next week. There are a lot of potential outcomes, though a half-point decrease appears to be a bit of stretch as that 100% figure implies, there is plenty of wiggle room for the Fed to disappoint.

Todd Shriber does not own any of the aforementioned securities.

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