Yes, the heading is a cinematic reference. Today I mention the 1994 film “Legends of the Fall” to paint the picture of today’s weakness in stocks.
That movie, starring Brad Pitt and Anthony Hopkins, was set in Montana, the very state that roiled equity markets today. Well, not really the state itself, but China canceled a scheduled visit to Montana where a delegation was supposed to visit some of the region’s farms.
That was seen as a knock on U.S.-China trade negotiations because China’s pledge to buy more American farm products is seen as integral to those talks. Forgive me for being trite, but there’s a really good chance that members of that Chinese delegation know what a farm looks like, and while Montana is a lovely place, today’s market action is very much over-reaction to this Montana news.
For his part, President Donald Trump is emphasizing that he wants a “complete” trade deal with China, not mini or piecemeal agreements. To that end, the White House lifted tariffs on over 400 Chinese goods, which should be more important to markets and investors than a delegation going or not going somewhere.
To finish the week, the Nasdaq Composite lost 0.80% while the S&P 500 was lower by 0.05%. The Dow Jones Industrial Average slipped 0.59%. In late trading, just 11 of the Dow’s 30 components were trading higher and just two of those 11 names were up more than 1%.
In late trading, three of the four healthcare stocks in the Dow along with Walgreen Boots Alliance (NASDAQ:WBA), a name with significant exposure to pharmaceuticals sales, were trading higher on news that the Senate will not be receptive to a plan pushed by Speaker of the House Nancy Pelosi (D-CA) to use Medicare to push for lower prices on 25 popular drugs.
“Senate committees have passed their own versions but the GOP is not united on the issue. Deep-pocketed drug makers are spending millions on lobbyists to ensure that there will be no substantial constraints on prices,” according to Seeking Alpha.
“The Senate package contains some elements of Pelosi’s plan to bring down drug prices by capping expenses for seniors with Medicare prescription drug coverage and restraining drug increases,” according to Politico. “But is does not contain negotiating provisions Pelosi is seeking. Many Republicans don’t like that bill to begin with, but they dislike Pelosi’s plan even more.”
Big Macs, Big Dividends
McDonald’s (NYSE:MCD) wasn’t one of the Dow stocks trading higher today, but the world’s largest fast food chain did deliver some good news for investors in the form of a higher dividends, something the company is known for. McDonald’s said it’s raising its quarterly dividend to $1.25 a share from $1.16. Prior to the dividend increase announcement, McDonald’s was yielding 2.24%, implying plenty of room for dividend growth.
Guess Who’s Back
Another day, another mention of Boeing (NYSE:BA). The stock lost 1.35% today on news pertaining to, what else, the 737 MAX passenger jet. The Federal Aviation Administration (FAA) said earlier today that Boeing still has some work to do before it’s clear to send the 737 MAX back to the skies. FAA Chief Steve Dickson met with Boeing yesterday and is slated to meet with 50 aviation safety regulators in Canada next week about software issues on the 737 MAX.
“The FAA has been reviewing proposed software and training changes from Boeing Co for months and it remains uncertain when Boeing will conduct a certification test flight, a step needed before its best-selling plane can fly again,” according to Reuters.
Dow Jones Bottom Line: Wild Times Ahead
The calendar is getting close to October, which is usually a strong month for stocks, but some market observers are forecasting fireworks in the tenth month of the year and that’s something for investors to consider as we inch toward the end of third quarter.
We believe high October volatility is more than just a coincidence,” John Marshall, equity derivatives strategist at Goldman, said in a note Friday, reports CNBC. “We believe it is a critical period for many investors and companies that manage performance to calendar year-end.”
It’s possible that October volatility comes in below expectations, but that scenario likely revolves around trade talks and how third-quarter earnings season shapes up.
Todd Shriber does not own any of the aforementioned securities.