Remembering the old adage about stocks falling faster than they rise, investors should be dismayed that Tuesday’s rebound did not recoup all of Monday’s losses. However, the reasons behind the Tuesday bounce back are, arguably, flimsy.
For example, one of today’s catalysts was China saying it will not let the yuan depreciate further. That helped for today, but some market observers believe there are trust issues that need to be resolved when it comes to the U.S. and its dealings with China. Another reason equities surged today is the belief that the trade war cannot get much worse. That’s a belief rooted in hope, not empirical evidence.
Still, the Nasdaq Composite added 1.39% on Tuesday while the S&P 500 rose by 1.31%. Following a day in which all 30 of its components finished in the red, the Dow Jones Industrial Average posted a Tuesday gain of 1.22%.
Some of today’s Dow winners were of the predictable variety and that is OK. Nike (NYSE:NKE) one of the more tariff-sensitive names, jumped 2.95% today. If trade tensions ebb, the athletic apparel maker is likely to recoup some of its recent losses and then some as market participants realize Nike is much more than a China story.
Dow tech names, including Cisco Systems (NASDAQ:CSCO) and Apple (NASDAQ:APPL), the latter of which is highly tariff-sensitive, finished higher today. Analysts are calling attention to the fact that while the trade war is not good news for Apple, the company is prepared for it. Those preparations may not be factored into Apple stock.
“Apple has planned ahead for the protracted trade war and should be able to offset the costs even with higher import costs,” said TF International Securities analyst Ming-Chi Kuo.
Dow Today: Boeing’s Back
Unfortunately, I don’t mean that the stock is back, though shares of Boeing Co. (NYSE:BA) gained 0.47% today. I mean that the Dow’s largest component is back in this space. Boeing’s recent slide, one that has seen the stock tumble 7% over the past month, has the shares residing below its key moving averages, prompting some questions about the stock’s technical health.
“The 50-day moving average price of Boeing shares also dipped below the 200-day moving average in June—a signal technical traders will look at for signs of a shift in investor sentiment,” reports Barron’s. “When the shorter-term moving average is above the longer-term moving average, it is a sign that a stock has positive momentum and that good news is propelling shares higher.”
Dow After The Bell
As I noted yesterday, Walt Disney (NYSE:DIS) reports quarterly results today after the close of U.S. markets. The stock gained 2.64% today in advance of that update. For its fiscal third quarter, Disney is expected to earn $1.72 a share on revenue of $21.4 billion. A year earlier, the company earned $1.87 a share on revenue of $15.4 billion.
Disney has a history of retreating immediately following its earnings reports. If history repeats, that could be a buying opportunity in the entertainment giant’s shares because the stock closed more than 10% below the average analyst price target today.
Bottom Line on Dow Jones Today
Something interesting about China’s effort to devalue its currency: the Invesco DB US Dollar Index Bullish Fund (NYSEARCA:UUP), which measures the greenback against a basket of major currencies, is lower by a third of percent over the past week.
Behind the scenes, China was likely hoping that its yuan devaluation efforts would send the dollar soaring, further crimping U.S. exporters, but that has not yet materialized. Even if the greenback gains strength on the back of the trade war, that is an impetus for the Federal Reserve to get involved and lower interest rates again, also known as good news for stocks.
Todd Shriber doesn’t own any of the aforementioned securities.
