It sure feels as though China has loomed large in this space for some time and that was the case again Wednesday as stocks rebounded from Tuesday’s tumble after a Chinese official said his country is open to even a small trade deal with the U.S.
That’s encouraging news, particularly with the two sides scheduled to meet tomorrow, and it’s a step in the right direction on China’s part. But there’s a problem.
President Trump has previously said he wants a full trade accord, not something small. China’s caveat when it comes to a limited trade pact is that Trump must promise to not impose additional tariffs on Chinese goods. That’s another variable to say the least.
However, with signs that the economy is softening and amid the impeachment probe on Capitol Hill, Trump may consider taking a smaller trade deal simply to have a political victory to tout.
There are a lot of moving parts to the U.S.-China trade relationship, but the gestures highlighted today were enough to send the Nasdaq Composite higher by 1.02%, while the S&P 500 jumped 0.91%. The Dow Jones Industrial Average added 0.70% as 28 of the blue chip index’s 30 components were in the green in late trading.
Tech Leadership
The technology sector is among the most sensitive to trade headlines, good and bad, so it wasn’t surprising to see some leadership out of the group with Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC) ranking as the top two performers in the Dow Jones today.
Apple (NASDAQ:AAPL) was in on the fun, placing as one of more than dozen Dow stocks to gain 1% or more today after Canaccord analyst T. Michael Walkley reiterated a “buy” rating on Apple, while boosting his price target on the iPhone maker to $260 from $240.
“Despite near-term headwinds from some consumer willingness to wait for 5G iPhones in 2020 and ongoing trade tensions with China, we are encouraged by the stronger than anticipated initial demand for the iPhone 11 lineup and believe Apple will maintain its market share leadership of premium-tier smartphones,” said Walkley in a note to clients.
Each of the Dow’s six technology members closed higher today.
Daily Boeing Update
Eventually, Boeing (NYSE:BA) will cease appearing in this piece on a daily basis, but aerospace giant bears struck it again today. The shares closed modestly higher even after American Airlines (NASDAQ:AAL), one of the world’s largest carriers, said it will continue keeping the Boeing 737 MAX jet out of service until at least Jan. 15.
That casts some doubt … doubt that has recently been increasing, about the timeline for getting the 737 MAX airborne again. Boeing remains optimistic it can get the plane in the skies again in the current quarter, but the final say on the matter lies with regulators, not Boeing.
Revisiting A Strong Stock
While Boeing seems to appear here almost everyday, I haven’t mentioned McDonald’s (NYSE:MCD) in a bit. Although the stock is off its highs for the year, it’s up 1% over the past week and still ranks as one of the Dow’s best-performing names in 2019 with a gain of almost 19%.
What’s interesting about that performance is that McDonald’s compares favorably with some of the growth names in the restaurant industry this year while maintaining some qualities of a value stock. In fact, shares of McDonald’s are among the most attractively valued in the restaurant space.
Bottom Line on the Dow Jones Today
There are a couple of things to consider over the near-term that could benefit stocks. First — knock on wood on this one — President Trump isn’t tweeting as much about China. That’s probably a good thing for riskier assets because his China tweets are rarely positive.
Second, once markets move past third-quarter earnings season, which could be difficult thanks to expectations that have already been ratcheted down, the outlook improves.
“The overall outlook looks better on a 6-12 month horizon,” said BlackRock in a note out today. “We see a trough in U.S. economic growth, as the global monetary stimulus delivered to date feeds into the economy. This should boost companies’ top-line growth – at the late stage in the economic cycle when U.S. equities have historically delivered above-average returns.”
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
