Wednesday was an interesting day of market action. Stocks rallied even as some market observers said investors may be overlooking mounting signs of a looming recession.
On a related note, new Quinnipiac Poll showed 37% of those surveyed believe the U.S. economy is declining while just 31% see it getting better. Should those numbers worsen in the coming months, it’s likely a death knell for President Donald Trump’s 2020 reelection bid because the economy has long been the issue he has polled favorably on.
Adding to those concerns was a separate poll of would-be homebuyers that indicates more than a third are expecting a recession to arrive in 2020. Reading the tea leaves here, it would be reasonable to assume that, like him or not, President Trump is shrewd enough to realize that the trade war with China is seen as crimping the economy. He cannot carry that baggage into 2020 and hope to be reelected.
Even with those ominous headlines, the Nasdaq Composite gained 0.38% while the S&P 500 added 0.65%. The Dow Jones Industrial Average advanced 1%.
I mention Visa (NYSE:V) today not because the stock finished higher (it didn’t) and not because it is one of the Dow’s best-performing names this year (it is), but rather because the often-overlooked Dow component was on the receiving end of some bullish analyst commentary today, indicating it could add to its 35.2% year-to-date gain.
“We’ve come away from the meeting with greater conviction that V’s ‘network of networks’ strategy is significantly expanding the company’s opportunity set—and as a consequence, we see V continuing to generate strong volume growth,” said Guggenheim analyst Jeff Cantwell in a recent note.
The analyst has a $199 price target on Visa shares.
Oil Bucks Bad News
Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), the Dow’s two energy components, traded higher today, which was something of a surprise when considering some gloomy commentary about oil prices out from Morgan Stanley this morning.
“More cuts would be required in 2020 if [OPEC] were to balance the market,” said Morgan Stanley analysts. “Much depends on demand growth next year, but on our current estimates the ‘call on OPEC’ is about 1M bbl/day below current production in 2020.”
Rather, Chevron and Exxon were propped up by a bullish inventories report, showing a larger-than-expected decline. Last week, domestic oil inventories declined by 10 million barrels, more than double the expected 4.7 million-barrel drop, according to the American Petroleum Institute.
Nike Sizing Up New Highs
Nike (NYSE:NKE) is a stock I’ve mentioned plenty in this space because of its tariff sensitivity, which explains a dismal August performance for the stock, but the shares surged 1.78% today. The stock resides just 7% below its 52-week high, though, and some traders are talking about a swift return to record highs for the athletic apparel maker. So if you’re looking for a large-cap growth name for your portfolio, Nike is viable name to consider over the near-term.
A Defensive Dynamo
It’s hard to ignore the stocks that have been trading high in a rough August for the broader market. One of those names is Dow component Coca-Cola (NYSE:KO). Sure, the stock is up “just” 1.35% this month, but that’s pretty good for a slow-moving consumer staples name, and really good when considering broader benchmarks have been thrashed.
The stock is healthy, fundamentally and technically speaking, prompting some traders to call more new highs over the near-term.
Bottom Line on the Dow Jones Today
It’s hard to reconcile all the gloomy chatter about the economy with today’s equity market upside, but the path of least resistance for this school of thought is that if more signs of weakness emerge for the U.S. economy, President Trump will “cool it” on the trade front and the Federal Reserve will react swiftly with more rate cuts.
For the rest of this week, I wouldn’t bank on much action, save for President Trump getting active on Twitter, because the Labor Day holiday is looming. We could see some modest selling Thursday and Friday as traders look to dial back risk ahead of the long weekend.
Todd Shriber does not own any of the aforementioned securities.