Dow Jones Today: China Provides a Calming Influence

Believe it or not, China was a big reason why the Dow Jones Industrial Average rallied today

No need to do a double-take on that headline. U.S. stocks really did rally today thanks in large part to some surprisingly strong economic data out of China.

The world’s second-largest economy said exports jumped 3.3% last month while economists were expecting a 2% drop. Even amid the trade hostilities with the U.S., Chinese imports also fell less than expected in July.

Sure, that was just one data report out of China and there is a very real possibility that the U.S. and its rival will butt heads again on trade, but for today, news that the Chinese economy remains firm was enough to lift riskier assets.

Buoyed by a resurgence in tariff-sensitive technology stocks, the Nasdaq Composite surged 2.24% while the S&P 500, where technology is also the largest sector, jumped 1.88%. The Dow Jones Industrial Average finished higher by 1.43%.

Let’s have a look at some interesting takeaways from the Dow today.

Be Careful With This Dow Surprise

I’ve frequently mentioned industrial machinery maker Caterpillar (NYSE:CAT) in this space and with good reason. Caterpillar is highly tariff-sensitive and is lower by nearly 5% this year, making it one of the worst-performing names in the Dow.

Somehow, shares of Caterpillar added 1.03% Thursday even after Goldman Sachs downgraded the stock to “neutral” from “buy” while lower its price target on the shares to $130 from $156.

Goldman “believes rising inventories of trucks and construction machines will lead to production cuts in 2020. That will hurt next year’s earnings for these companies. And higher inventories is another sign the global industrial economy is slowing down,” reports Barron’s.

Analyst upgrades and downgrades are not gospel, but as it pertains to Caterpillar, it’s hard to endorse the stock with trade tensions running high and the aforementioned factors cited by Goldman very much in play.

Rebound Starting?

Walt Disney (NYSE:DIS) is another name that has been getting some run here in recent days. Long story short, I’ve pointed out that the stock usually falls after earnings reports and that happened yesterday, but there is no shortage of support for Disney shares.

The stock surged 2.29% today after Credit Suisse upgraded the ESPN owner to “outperform” while boosting its price target on the shares to $150 from $130, implying some decent upside from Disney’s Thursday close around $137.

Careful With the Headlines

On light news, Visa (NYSE:V) jumped 2.61%, good for one of the Dow’s better performances today. I always try to be careful here when it comes to politics, the all views are welcomed policy remains in effect, so I’ll just give to you straight about Visa: In an interview with CNBC, CEO Alfred Kelly said Visa will not ban customers from buying firearms with Visa-branded credit and debit cards.

However, I doubt those comments sparked the stock today as fellow Dow component American Express (NYSE:AXP) and rival MasterCard (NYSE:MA) both gained on the day, too.

Bottom Line on the Dow: Recession Risk

Not to be the bearer of bad news, but economists are forecasting a rising risk of recession. That percentage is up to 35% from 31% last month, according to Bloomberg. Those same prognosticators are also saying U.S. GDP growth will average 2.3% this year, down from the prior estimate of 2.5%.

Still, they’re saying the recession probably won’t start until 2021. For investors looking for some silver lining, the U.S. consumer remains healthy and it’s hard to envision a recession against that backrdop. Plus, not to be trite, but economists are often wrong.

Todd Shriber does not own any of the aforementioned securities.

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