Following up on the notion of sometimes good news is bad news, a theme highlighted here last Friday, stocks struggled to start the week. Market participants increasingly speculated last week’s strong June jobs report means the Federal Reserve will not proceed with cutting interest rates anytime soon.
To start the week, the Nasdaq Composite slipped 0.78% while the S&P 500 lost 0.48%. The Dow Jones Industrial Average lost 0.43% with more than two-thirds of the blue-chip index’s components pointing lower in late trading.
Something else that has been discussed here in recent days is the shift away from trade concerns to company-specific issues. That was very much the case today as a slew of big names in the Dow were punished for a variety of stock-specific reasons. Let’s have a look at some of those names here.
Shares of Apple (NASDAQ:AAPL), one of the largest components in all three major U.S. indexes, slid 2.06% after Rosenblatt Securities analyst Jun Zhang issued a rare “sell” rating on the stock. Apple, the largest technology member of the Dow, does not garner “sell” ratings with any level of frequency, but if iPhone sales disappoint, analysts could ratchet down ratings on Apple.
“We believe Apple will face fundamental deterioration over the next 6-12 months,” said Zhang in a note. “We believe new iPhone sales will be disappointing [and] iPad sales growth will slow in the second half of 2019.”
Verizon Inc. (VZ)
Verizon (NYSE:VZ), usually a defensive name, was somewhat offensive today, losing 0.70% after Citigroup lowered its rating to “neutral” from “buy,” citing risks in the broader telecommunications space.
“The opportunities for further multiple expansion have narrowed, in our view, as we close in on different wireless merger scenarios from what we previously envisioned and Verizon is less likely to pursue bolder strategic moves to accelerate its network and 5G strategies over the next 6-12 months,” said Citi analyst Michael Rollins in a note.
Looking For Good News?
Investors looking for positive vibes on a day when those were hard to come by can focus on at least two Dow stocks. Let’s start with UnitedHealth Group (NYSE:UNH), the largest healthcare component in the Dow. Shares of the beleaguered health insurance provider could be second-half winners.
“That’s at least according to technical analyst Mark Newton, founder of Newton Advisors. With UnitedHealth shares down nearly 14% from their 52-week highs made in December, Newton said Friday that this Dow dud is poised for a breakout,” reports CNBC.
A cyclical name to consider may just be Caterpillar (NYSE:CAT), shares of which are up just 7.35% this year.
“Caterpillar has created a virtuous cycle by manufacturing superior quality equipment that has fostered a premium product reputation,” said Morningstar in a recent note. “The equipment therefore is highly fungible with known resale values. It also has a robust support infrastructure, which creates a lucrative aftermarket business.”
With it appearing increasingly unlikely that the Federal Reserve will lower interest rates this month or perhaps even this quarter, investors will likely be beholden to company-specific events over the near-term. That will be even more true as second-quarter earnings reports start trickling in over the coming days.
This week, however, hope burns eternal for encouraging news on the rate cut front.
“Federal Reserve Chairman Jerome Powell is scheduled to give testimony on monetary policy before Congress on Wednesday and Thursday, which some investors expect will provide clues regarding the likelihood of a rate cut from the U.S. central bank when it meets at the end of the month,” reports Reuters.
Todd Shriber does not own any of the aforementioned securities.