A day after stocks were slammed, the major U.S. equity benchmarks struggled for direction Thursday. After some of the volatility investors have recently been coping with, today’s lethargy was arguably a welcomed respite.
If anything today’s action was surprisingly positive when considering trade tensions are still commanding headlines. Earlier this week, there was some thawing in trade hostilities when the U.S. pledged to back off imposing tariffs set to go into effect in early September until mid-December. Additionally, it looked like the U.S. and China would at least entertain good faith talks ahead of negotiations slated to commence in a couple of weeks.
However, the World Trade Organization (WTO) said today that China can seek sanctions against the U.S. for tariffs already being applied to Chinese imports. Predictably, the U.S. doesn’t agree with the WTO and is vowing to appeal the ruling.
China is not being shy about its plans to retaliate against the U.S. should any new duties against its goods be applied next month, so trade does remain a pivotal factor for investors to watch in the coming weeks.
With those factors in mind, the Nasdaq Composite losing 0.09% and the S&P 500 adding just 0.25% were performances that weren’t too shabby. The Dow Jones Industrial Average rose just 0.39%, but again, that’s OK given recent showings.
Dow Earnings Stories
Earnings season is in its latter stages, but there were a couple of notable reports out today from Dow components. Starting with the better of the two, Walmart (NYSE:WMT) surged 6.13% on volume that was more than double the daily average, after the largest U.S. retailer reported quarterly earnings per share of $1.27, beating Wall Street’s forecast by five cents.
The company also said same-store sales rose 2.8%, beating the estimate of 2.07% growth. Importantly, there was some good news on the online front, too.
“Online sales surged 37%, in line with the previous quarter’s increase and higher than the company’s expectation of 35%,” according to Reuters. “Walmart’s online expansion has come at a cost to profitability and losses at the U.S. e-commerce business could rise to about $1.7 billion this year from $1.4 billion in 2018, according to estimates from Morgan Stanley.”
While Walmart was one of the Dow’s best performers today, Cisco Systems (NASDAQ:CSCO) was one of the worst, slumping 8.61% on volume that was more than double the daily average in what was one of the stock’s worst intraday showings in several years.
Cisco gave tepid guidance for the current quarter, prompting a spate of bearish responses by sell-side analysts. At least three analysts lowered price targets on Cisco, with one warning the company may need to rein spending on stock buybacks unless it wants to take on more debt.
DJIA Bottom Line: Glimmers of Hope
I’ll repeat what I frequently say, that being that one decent day or not-so-bad day doesn’t make a trend, but there some positive vibes to consider. For one, none other than Warren Buffett continues piling into bank stocks, a group that has been battered in recent weeks.
That’s relevant in this space because financial services account for 15% of the Dow Jones Industrial Average, the index’s third-largest sector weight behind technology and industrials.
Second, consumer data in the U.S. remains buoyant, arguably too buoyant to signal an imminent recession. Yes, inverted yield curves cannot simply be glossed over, but nor can consumer spending, and its current pace, consumer data isn’t flashing recession warning signs. Just two of the Dow’s consumer-sensitive stocks closed lower today and one of those was Walgreens Boost Alliance (NASDAQ:WBA), a name that has been a dog and locked in a bear market for much of this year.
Todd Shriber does not own any of the aforementioned securities.