It was a wicked Wednesday for stocks as riskier assets were punished amid more concerns of slowing global economic growth. Today’s action is an extension of a theme that emerged yesterday on the back of a weak September manufacturing reading.
On Wednesday, it was a combination of weak private payrolls data and slack third-quarter sales updates from Ford (NYSE:F) and General Motors (NYSE:GM) that hampered stocks. To the point of the ADP private payroll survey, that reading showed just 135,000 private sector jobs added in September and a revised reading of 157,000 for August.
Economists expected the addition of 140,000 non-government jobs in September and 195,000 for August. All of this is important because the Labor Department delivers the September jobs report on Friday before the opening bell.
“Businesses have turned more cautious in their hiring,” Mark Zandi, chief economist at Moody’s Analytics, said in a statement. Moody’s produces the figures with ADP. “Small businesses have become especially hesitant. If businesses pull back any further, unemployment will begin to rise.”
Growth concerns sent the Nasdaq Composite tumbling by 1.56% while the S&P 500 slid 1.79%. The Dow Jones Industrial Average lost 1.86% with just one stock higher in late trading, easily the worst ratio in weeks.
Just One Dow Winner
Congratulations to Johnson & Johnson (NYSE:JNJ) for being the Dow’s lone winner today, but congratulations are not in order for the explanation behind the company’s Wednesday defiance of broader market action. JNJ reached a settlement and a relatively modest one at that with two Ohio counties related to the opioid controversy.
Amid global growth fears, it’s not surprising that oil prices slumped today and when oil prices slide, Dow component Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) usually follow suit. Chevron was the worst performer in the Dow today, shedding 3.18%.
Regarding Exxon, there were other factors behind that stocks’ Wednesday decline. While there is some talk that energy sector earnings could surprise to the upside, Exxon, the sector’s biggest constituent, doesn’t appear poised to deliver stellar results.
“Analysts’ earnings estimates for the third quarter have been steadily dropping over the past year. Late last October, they expected the company to make $1.51 per share. They now anticipate that the company will generate 84 cents per share, three cents below their expectations before the securities filing,” according to Barron’s.
Good News on a Bad Day
Obviously, good news was hard to come by today, particularly at the stock-specific level. The Dow’s sea of red confirms as much and while Walt Disney (NYSE:DIS) was one of the Dow offenders today, there was some positive musing on the stock. Of course, it has to do with the company’s streaming plan, Disney+.
Morgan Stanley analyst Benjamin Swinburne “estimates that Disney+ will reach about 15.5 million subscribers by the end of Disney’s fiscal 2020, which ends in September, and 75.5 million by the end of 2024. He forecasts ESPN+ users growing to 10.3 million in five years, from 2.7 million at the end of fiscal 2019, and Hulu going to 55.4 million subscribers from 29.2 million,” reports Barron’s, citing the analyst.
Shares of Boeing (NYSE:BA), the Dow’s largest component, finished lower by 1.94% today amid a flurry of headlines. There’s an intensifying spat between Boeing rival Airbus where the former says the latter doesn’t obey World Trade Organization (WTO) rulings, and that’s why Airbus is now subject to U.S. tariffs.
Then there was the New York Times story indicating that a senior engineer had filed an internal ethics complaint earlier this year, accusing Boeing of reject safety system checks on the now-ground 737 MAX passenger jet due to cost issues.
Speaking of the 737 MAX, it’s appearing increasingly unlikely that the plane will be back in the skies before the end of this year. That was Wall Street’s desired timeline for the jet to be airborne and it looks like Boeing could disappoint on that front.
Bottom Line on Dow Jones Today
There aren’t bright spots when it comes to contracting growth, but for those desperate for silver linings, it’s probable that if employment and manufacturing data continue disappointing, the Federal Reserve steps in with another interest rate cut, perhaps as soon as this month. The problem is the effectiveness of the last two rate cuts, at least for now, can be debated.
That shifts some of the focus to earnings at time when S&P 500 profits for the first three quarters of this year likely contracted.
Todd Shriber does not own any of the aforementioned securities.