There is no flowery language to adequately describe Monday’s market action. Put simply, today was the worst day of 2019 for U.S. stocks.
The Nasdaq Composite plunged 3.81% while the S&P 500 shed 3.27%. The Dow Jones Industrial Average shed 3.23% as trade fears held investors hostage for another day.
Before getting into the bloodbath, allow me to point out a not-so-fun fact. I have been penning the “Dow Jones Today” wrap up since late May. Regular readers know that I frequently point out something along the lines of “20 of the Dow’s stocks closed up/down today.” Today was a first because, in late trading, all 30 Dow components were in the red and in most cases, deeply so.
This is how bad things were for the Dow today: the index’s two best performers last week were Verizon Communications (NYSE:VZ) and Coca-Cola (NYSE:KO) and those stocks lost 0.67% and 1.32% respectively, today.
“Of course, Coke generates a lot of revenue overseas—about 46% of its total sales—but no one expects people to stop drinking Coke (or the company’s other beverages),” reports Barron’s. “Verizon and Coke stocks yield 4.3% and 3.1%, respectively, better than the 2.3% average yield for stocks in the Dow.”
Trade Problems Equal Dow Tech Woes
On days like today, it is accurate to use the word “unfortunate” to describe the Dow’s construction. Unfortunate because the index features no exposure to the real estate and utilities sectors, groups that are not export-dependent and that generate nearly all of their revenue in the U.S.
The Dow is, however, heavily exposed to some cyclical sectors that are big exporters and vulnerable to trade wars, such as technology. Led by Apple (NASDAQ:AAPL), which slipped 5.23%, all six of the Dow’s tech components finished lower today. Underscoring how bad today was for tech stocks, the best-performing tech name in the Dow today was Intel (NASDAQ:INTC), shares of which tumbled 3.51%.
With Apple being a bellwether stock, there was some analyst support out today for the iPhone maker.
“We believe Apple is more likely to absorb all the tariff impact and not raise prices on iPhone shipments and other hardware devices into the US, which we estimate will lead to a ~300 bps headwind to iPhone margins,” said JPMorgan.
Oil Stocks in the Dow Run Dry
West Texas Intermediate futures slid almost 2% today, which was about the average loss for Dow components Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX). Oil and energy stocks are considered riskier assets and not suitable for days like today. More pressing (or depressing) for oil is the emergence of electric vehicles and alternative energy.
In a note out today, Mark Lewis, global head of sustainability research at BNP Paribas, said “the economics of renewables in tandem with EVs are set to become irresistible over the next decade.”
Dow Technical Concerns
Yes, we’re on the slower end of earnings season, but Walt Disney (NYSE:DIS) reports tomorrow. That report could be taking on added significance because Disney stock closed below its 50-day moving average today for the first time since April.
That’s potentially bad news for multiple reasons, not the least of which is the fact that Disney stock has traded lower after six of the company’s last eight earnings reports.
Bottom Line on DJIA
When I’m not writing the Dow Jones Today, I’m usually writing about ETFs, so I’m going to use that asset class to highlight what worked today and what should work if these trade tensions continue plaguing stocks.
There are over 2,200 ETFs trading in New York, of which fewer than 400 closed higher today. Strip out the leveraged and inverse products, and that number declines considerably. What worked in terms of “normal” ETFs today were gold and other precious metals funds and bonds including treasuries (not surprising), corporate debt, municipal bonds, and some international sovereigns.
Todd Shriber does not own any of the aforementioned securities.