Earlier this week, stocks rallied on encouraging comments from President Donald Trump about trade talks with China. Of course, the rally was nice, but it was accompanied by doubts, confirmed by some Chinese media, that the president hadn’t actually talked to anyone in China about cooling off the long-running tensions.
Fortunately, that confirmation emerged today that two sides are indeed discussing trade and that helped stocks focus on something other than the second-quarter GDP revision, was pared down to growth of 2.1%. There was some good news in that GDP report that indicates the oft-discussed recession isn’t as imminent as previously thought.
Second-quarter consumer spending surged 4.7%, above the 4.3% forecast in July, good for the best reading in five years. That coupled with the trade talks sent the Nasdaq Composite higher by 1.48% while the S&P 500 gained 1.27%. The Dow Jones Industrial Average got in on the fun with a Thursday gain of 1.25%.
In late trading, 25 of the 30 Dow members were trading higher, indicating broad-based strength in the blue chip index today.
As always, it’s good to see technology stocks lead a rally. That was the case today with Microsoft (NASDAQ:MSFT) gaining 1.89%. Already one of the best-performing stocks in the Dow this year, Microsoft was boosted today by some positive analyst commentary with Wedbush Securities analyst Daniel Ives reiterating an “outperform” rating on the shares, citing strength in the Azure cloud business.
“We are bullish on MSFT over the next year given our thesis that Azure’s cloud momentum is still in its early days of playing out within the company’s massive installed base,” said Ives in a note.
Apple (NASDAQ:AAPL) was another solid Dow technology performer today, adding 1.69% after the company announced a Sept. 10 event to reveal the latest iPhone.
“Apple typically puts new iPhones on sale within two weeks following their launch and rolls out the accompanying software update a few days after showing off the devices,” reports Bloomberg. “The new iPhones will be key to Apple’s holiday quarter.”
Careful With This Bounce
Caterpillar (NYSE:CAT) was the best-performing member of the Dow today with a gain of 2.69%, not a surprising move given this stock’s level of tariff sensitivity. There are still some structural issues in the industrial sector and President Trump’s willingness to rapidly reverse course on trade has previously punished cyclical names like Caterpillar.
Another bounce I’d caution on is that of the financials, particularly on a day when Bank of America (NYSE:BAC), formerly though not currently a Dow component, was hit with a downgrade due to rising concern about net interest margins. That is not a scenario that’s specific to BAC shares.
Dow Jones Bottom Line
I wanted to save this for tomorrow, the last trading day of the month, but I’ll roll it out today. Historically, September is the worst month of the year for stocks with the S&P 500 averaging a September decline of 1.1% over the past two decades.
Todd Shriber does not own any of the aforementioned securities.