It takes more than a day for stocks to work through President Donald Trump’s trade tweets, explaining why losses that arrived yesterday stretched into Friday.
The president’s Thursday tweet storm arrived late in the session. It may not be surprising that some of the stocks residing in the Dow Jones Industrial Average most sensitive to tariff antics really slumped today after closing lower on Thursday.
The Nasdaq Composite, home to a slew of technology companies feeling the pinch of the latest tariff threat, lost 1.32% today while the S&P 500 closed lower by 0.73%. The Dow Jones Industrial Average shed 0.37% to close the week with about two-thirds of the blue-chip index in the red today.
The impact of previous tariffs has been felt in multiple corners of the economy. So much so that data confirms China is no longer the biggest trading partner of the U.S. In a report out today, the Commerce Department said American exports to China slumped 18% in the first half of the year and that China is now the third-largest U.S. trading partner behind Mexico and Canada.
It’s unlikely that China will be regaining that top spot anytime soon, but it is probable that tariffs mean more pain for some of the following Dow stocks.
Just Don’t Do It
For Nike (NYSE:NKE) investors, tariffs are very much a case of “just don’t do it” as highlighted by the stock’s 2.16% tumble today, putting it among the worst-performing Dow names for the day.
The good news: today’s slide in shares of Nike may be a case of the baby being thrown out with the bathwater. While the company has significant China exposure, it may be be able to endure another batch of tariffs without much pain for investors.
“Nike, the world’s largest shoemaker, has a sizable 23% exposure to China. Surprisingly, the consensus on Wall Street is that the athletic apparel giant won’t suffer from the new tariffs,” according to CNBC.
Dow Losers: Technology, Of Course
The technology sector, the largest sector weight in the S&P 500, is a predictable victim of the China trade spat because American tech firms either source components in China, depend on that country as a major end market, or both. Cisco Systems (NASDAQ:CSCO) slipped 3.86% today, making it the worst-performing name in the Dow. Apple (NASDAQ:APPL) was another tech stock taken to task, losing 2.12%.
Weak price action in Apple today makes sense because the company has significant exposure to China, where many of Apple’s most important products are made and sold. Of the many negative effects of tariffs, one includes that companies have to pass higher costs onto consumers. That often triggers reduced demand. Some analysts are already speculating that the new tariffs could pinch Apple.
“If Apple passes through the 10% tariff to consumers we could see a hit to iPhone demand by roughly 6 million to 8 million iPhones in the U.S.” over the next 12 months,” said Wedbush analyst Dan Ives.
Bottom Line on the Dow
Underscoring the need to play some defense over the near-term, just 10 Dow members closed higher today and only two of those names would not be considered defensive stocks. Obviously, most Dow members can be considered multi-national companies with significant export and China exposures, but there are ways to skirt trade troubles at the sector level (banks and healthcare to name a pair).
Adding to the domestic focus conversation, it is relevant to state that nearly a third of the Russell 2000 reports earnings next week, notable because U.S. small-cap companies are heavily focused on their home market, not China.
Todd Shriber does not own any of the aforementioned securities.