Politics reemerged Tuesday to the detriment of stocks. As highlighted by his speech at the United Nations (UN) in New York today, apparently President Donald Trump can only be conciliatory toward China on trade for so long.
“Not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping technology transfers and the theft of intellectual property and also trade secrets on a grand scale,” said the president in his speech.
That marked an abrupt end to optimism that emerged over the past several weeks that the world’s two largest economies could soon find a way to play nice on trade. However, today’s dismal market action was a bipartisan affair.
Adding to the pressure on equities today was news that Speaker of the House Nancy Pelosi (D-CA) is scheduled to make an announcement later this afternoon on that legislative body’s plans to pursue impeachment proceedings against President Trump. Pelosi has been under some pressure from fresher, more left-leaning members of her caucus to pursue impeachment.
Those factors sent the Nasdaq Composite lower by 1.46% while the S&P 500 slipped 0.84%. The Dow Jones Industrial Average finished lower by 0.53%. In late trading, just nine Dow stocks were higher, a disappointing number considering markets opened to the upside to start the day.
Tech Trouble
On a day when trade tensions were reignited, it was not surprising to see tech stocks take the brunt of that punishment. At one point today, some marquee tech names had shed a combined $56 billion in market value, according to Bloomberg.
So no, the Dow’s tech components were not among the index’s nine winners today. Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) were among the Dow’s worst performers today while Apple (NASDAQ:AAPL) closed slightly lower.
I’m not proclaiming a star of a new bear market for Intel here, but one look at the stock’s chart underscores how sensitive this name and other chip stocks are to trade tensions. Simply put, Intel and the broader semiconductor space slumped when trade tensions ran high and rallied when those hostilities cooled.
Other Predictable Losers
Due to the rising status of the U.S. as a major oil exporter, domestic oil companies have become increasingly sensitive to the U.S.-China spat. That includes behemoths such as Dow components Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), both of which shed roughly 1% today. President Trump’s U.N. speech may have provided traders with the perfect opportunity to depart crude and oil equities, which have remained surprisingly sturdy even as Saudi Arabia has restored most of the production lost from the drone strike earlier this month.
“Reuters reported on Monday that Saudi Arabia had restored more than 75% of crude output lost after attacks on its oil installations and would return to full volumes by early next week,” according to the news agency.
What’s interesting about oil and the energy sector here is that options market activity suggests that traders are positioning for another spike higher by crude. Of course, I can’t guarantee that scenario will come to pass, but if it does, Exxon and Chevron probably rebound.
Boeing Update
Back to Boeing (NYSE:BA). Give the stock credit: It finished higher today on what was obviously a challenging day for equities, and it did so amid some challenging company-specific headlines. I’m not calling it vindication, but Boeing got a bit of reprieve on the 737 MAX controversy today thanks to report from federal regulators.
“Some of the Federal Aviation Administration inspectors who worked on training requirements for the troubled Boeing 737 Max planes and other aircraft were underqualified and the air safety agency misled lawmakers about it,” CNBC reports, citing the report released earlier today.
Bottom Line on Dow Jones Today
This is by no means a bold proclamation, but if trade tensions remain elevated and there’s substance to the impeachment inquiry (I’m not saying there is or isn’t), it will pay to be defensive and markets reflected as much today.
It’s one day worth of anecdotal evidence, but using exchange traded funds as the guides, nine utilities funds hit record highs today. Investors may want to take some cues from that point over the near-term.
Todd Shriber does not own any of the aforementioned securities.
