To the surprise of no one who has paid attention to financial markets this year, stocks traded lower today. This was due in large part to President Donald Trump tweeting about the state of the U.S. trade relationship with China on the day talks between the two sides commenced in Shanghai.“China is doing very badly, worst year in 27 — was supposed to start buying our agricultural product now — no signs that they are doing so,” he said on Twitter earlier today. “That is the problem with China, they just don’t come through.”
Trump’s tough talk on China did not end there. Later in the day, on his way to Virginia, Trump told the press corps, “we’re either going to make a great deal or we’re not going to make a deal at all.”
Yesterday, I warned that with the trade negotiations starting today, stocks could be beholden to Trump’s comments. That was the case Tuesday as the Nasdaq Composite slipped 0.24% while the S&P 500 closed lower by 0.26%. The Dow Jones Industrial Average lost 0.09%.
Pfizer Falls Again
On Monday, pharmaceuticals giant Pfizer (NYSE:PFE) was one of the worst-performing stocks in the Dow Jones Industrial Average. This following the news that the company is spinning off its generics business and that the unit will merge with Mylan (NYSE:MYL).
Traders didn’t like that deal on Monday and they really didn’t like it today, sending Pfizer lower by 6.39% on volume that was more than triple the daily average. Bank of America Merrill Lynch and Morgan Stanley downgraded Pfizer to the equivalent of “hold” ratings from the equivalents of “buy” ratings.
“We ultimately believe PFE’s decision to spin-off its Upjohn unit makes strategic sense,” wrote Bank of America Merrill Lynch analyst Jason Gerberry. “However, for PFE stock to work, the RemainCo would need to trade above 18x forward multiple of EPS which we view as unlikely given current portfolio mix.”
Not Many Dow Winners
The list of Dow winners today is short as just 10 of the index’s 30 members were in the green in late trading. Two of those names were higher by more than 1% with top honors going to Procter & Gamble (NYSE:PG) and Boeing (NYSE:BA). With Boeing getting a lot of run in this space, I’ll focus on P&G today.
The consumer products giant climbed 3.82% on more than double the average daily volume after the Ohio-based company reported better-than-expected earnings. Excluding the $8 billion charge related to the old acquisition of Gillette, P&G earned $1.10 a share, slightly above the $1.05 per share Wall Street expected. Sales across all of P&G’s 10 original brands increased during the quarter.
Overall sales jumped 3.6% to $17.09 billion in the fiscal fourth quarter, ahead of the $16.86 billion analysts expected. Shares of P&G, which yield 2.57%, hit record highs today.
Dow Jones Bottom Line
The Federal Reserve meeting starts tomorrow and Apple (NASDAQ:AAPL) reports quarterly results after the close today, so there is ample event risk looming over the next 24 hours. With trade talks in China not off to the best start, at least according to President Trump, the Fed could feel some added pressure to lower interest rates in the U.S.
That would not be a benefit to U.S. equities, but it could be taken as a positive sign in China, too, perhaps renewing the conciliatory aspect to the discussions. With the dollar trading at two-month highs, export-dependent U.S. companies could use the benefit of lower rates.
Todd Shriber does not own any of the aforementioned securities.