U.S. equities posted modest declines to the start week as deal makers from the U.S. and China prepare to engage in highly anticipated trade negotiations on trade.
It was conflicting headlines on the trade front that capped upside for riskier assets today. Speculation is running high that because of a slowdown in its own economy, China is prepared to make a deal with the U.S. However, at least for today, skeptics appeared more focused on reports that China is looking to narrow the scope of the trade talks.
Assuming those reports are accurate, that could stall the talks before they really get going because U.S. President Donald Trump has previously displayed an “all or nothing” attitude on dealing with China, meaning investors’ sense of the matter is that the president wants big action on trade with the world’s second-largest economy or that the talks could be scuttled.
“Vice Premier Liu He, who will lead the Chinese contingent in high-level talks that begin Thursday, told visiting dignitaries he would bring an offer to Washington that won’t include commitments on reforming Chinese industrial policy or the government subsidies that have been the target of longstanding U.S. complaints,” Bloomberg reports, citing unidentified sources familiar with the matter.
That has traders apprehensive today, and that sent the Nasdaq Composite lower by 0.33% while the S&P 500 slipped 0.45%. The Dow Jones Industrial Average lost 0.36% with just 13 of the benchmark’s 30 components higher in late trading. Only UnitedHealth (NYSE:UNH) was flirting with a gain of at least 1%.
Bold Call On Cisco
After UnitedHealth, Cisco Systems (NASDAQ:CSCO) was the Dow’s next bets performer. As has been noted, Cisco is now a mature, blue chip tech stock, not a growth story, but at least one analyst is forecasting big upside for the shares.
In a note out today, Evercore ISI analyst Amit Daryanani said shares of Cisco can surge to $80, implying massive upside from today’s close just under $48.
“We think CSCO remains an attractive asset to own given the company’s positioning in a growing and profitable product market, increasing software/services mix, M&A tailwind, and a favorable shareholder return profile,” said Daryanani.
The analyst has an “outperform” rating and a $60 price target on Cisco and noted the $80 forecast is more of a multi-year thesis.
Weak Price Action
I haven’t mentioned 3M (NYSE:MMM) in this space in a while. Unfortunately, what’s about to follow isn’t good news. After probing a series of new 52-week lows last week, the shares of the industrial conglomerate were back at it again today, extending a loss that has seen the stock shed more than 5% over the past week.
Last week, Barclays reiterated an “underperform” rating on the stock while lowering its price target to $158 from $162. With a year-to-date loss of more than 18%, 3M is easily one of the worst-performing names in the Dow this year.
Walt Disney (NYSE:DIS) continues looking for ways to rebound from its August/September stumble. The stock was third-best performer in the Dow Jones today after UnitedHealth and Cisco. On a slow news day, it looks like Disney shares were boosted by the “The Little Mermaid LIVE!” program, which is scheduled to air on ABC on Nov. 5.
Bottom Line on the Dow Jones Today
Monday’s losses were not alarming, but after last week’s spate of concerning economic data, investors could use some good news. Actually, there was some of that today with Goldman Sachs noting the party in equities isn’t yet over and the U.S. economy isn’t all that close to recession.
“This downturn in manufacturing has been one of the longest on record and may start to stabilize, if not improve, somewhat soon,” Goldman chief global equity strategist Peter Oppenheimer said in a note. “Our economists remain of the view that growth has slowed but is not close to recession. … Assuming no recession, it is too early to expect this equity bull market to end in our view.”
One bank’s take isn’t a cure-all for weak economic data, but if Goldman’s forecast proves accurate, data could improve and stocks should react favorably.
As of this writing, Todd Shriber did not own any of the aforementioned securities.