When it comes to trade deals, size may matter, but smaller is also better than nothing at all. Delegates from China and Trump Administration officials started two days of trade meetings today in Washington and it looks like a “mini deal” is what’s on the table.
Although President Trump has long rebuked the idea of a small trade deal with China, that may be what ultimately comes of the two-day meeting and stocks seem to like the idea. Trump posted on Twitter earlier today that he plans to meet with Vice Premier Liu He tomorrow.
“The White House is looking at rolling out a previously agreed currency pact with China as part of an preliminary deal that could also see a planned tariff increase next week suspended,” reports Bloomberg. “Separately, Bloomberg is reporting that China plans to ask the U.S. to lift sanctions on its biggest shipping company, citing people familiar with the matter.”
Geopolitical negotiations are like any other negotiations: it’s all about compromise and compromise is all about both sides feeling like they’re benefiting. In other words, Trump probably won’t get the all or nothing trade deal he wants and financial markets seem to be at peace with that.
The Nasdaq Composite added 0.60% today, while the S&P 500 gained 0.64%. The Dow Jones Industrial Average climbed 0.57% with just over two-thirds of the index’s 30 members higher in late trading.
Construction machinery maker Caterpillar (NYSE:CAT) was one of the Dow’s top performers today, adding 2.7%, in a move that’s likely attributable to the aforementioned traded news as Caterpillar is one of the more trade-sensitive names in the Dow.
Shares of Caterpillar have been in a funk recently, sliding more than 8% over the past month, a tumble that has turned the stock negative on the year, making it one of the worst performers in the Dow.
“Given new data that has come in and healthy skepticism to begin with, we reduced our estimates for the remainder of 2019 and for 2020 as the North American market weakened and further production cuts are probably necessary to align to retail demand,” said William Blair analyst Larry De Maria, in a note out earlier this week in which the research pared 2019 and 2020 earnings estimates on Caterpillar.
The company reports third-quarter results on Oct. 23.
Speaking of Dow Jones stocks that have seemingly not been able to get out of their own way this year, there’s UnitedHealth (NYSE:UNH). Giving credit where it’s due, the managed care provider traded higher today despite some bearish analyst commentary.
“Jefferies analyst David Windley is dampening any expectations for a turnaround. In a note out Thursday morning, Windley downgraded managed-care giant UnitedHealth Group to Hold from Buy, and cut price targets for six other stocks” in the managed care group, reports Josh Nathan-Kazis for Barron’s.
Apple (NASDAQ:AAPL) continues grinding higher. With Thursday’s gain, the shares are up more than 6% this month. Today, yet another analyst chimed in on iPhone 11 demand and that boosted Apple stock.
“The market is clearly placing a higher value on AAPL’s growth in sales of non-iPhone products, the expanding growth opportunity in services, and continued buyback activity,” according to Longview Research. “With the iPhone now a tailwind for the first time in 18 months, we anticipate valuation can expand.”
To The Cloud
Shares of Microsoft (NASDAQ:MSFT) notched modest gains today with Wall Street chiming on the company’s surging cloud business, which has frequently been highlighted as an epic long-term catalyst for the stock.
Due in part to Azure, Microsoft’s cloud unit, Wedbush analyst Daniel Ives is forecasting “a “solid beat across the board on both the top and bottom line as cloud strength on Azure and Office 365 continues to be the fuel in the tank” when the company posts quarterly results.
Bottom Line on the Dow Jones Today
The aforementioned U.S.-China trade confab is slated to last two days, so there are short odds that I’ll be addressing that issue again tomorrow. Progress on that front was seemingly made today, leaving investors to hope for more of the same on Friday and that President Trump takes it easy on Twitter 24 hours.
Love him or hate him, he’s probably shrewd enough to realize he can spin any good news on trade with China into a political victory and that’s something stocks are likely to respond to positively.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.