The Dow Jones Industrial Average was flat on Wednesday amid speculation that President Trump and his Chinese counterpart, Xi Jinping, may not meet until next month, delaying signing the first phase of a trade accord between the world’s two largest economies.
This isn’t a surprising development. As has been previously noted in this space, the two leaders were expected to sign the initial part of the trade deal at a global economic conference in Chile this month, but that confab was scrapped due to geopolitical unrest in the South American country.
The losses on the Dow Jones today weren’t alarming by any stretch and the index was supported by some upside by marquee members as well as ongoing strength in European equities. This indicates that investors may want to consider revisiting ex-U.S. developed markets. In late trading, 18 of the Dow’s 30 components were in the green.
“While the latest data from Europe suggest a robust recovery may not be on the cards, the relative improvement eased fears that the global economy was hurtling toward a recession, prompting traders to temper bets for further monetary easing,” according to Bloomberg.
Here in the U.S., the Nasdaq Composite inched lower by 0.29% while the S&P 500 rose 0.07%.
Yes, Apple Can Keep Going
Shares of Apple (NASDAQ:AAPL) closed slightly lower today. You didn’t think this stock was going to move up in a straight line, did you? It’s easy to understand why investors may have felt that way because, with a market value north of $1.11 trillion, Apple has tacked on more than 65% this year.
That’s a remarkable run and one that would seem to imply it’s time for shares of the iPhone maker to take a break. However, some (many) analysts remain enthusiastic about Apple stock and believe the shares can continue trekking higher.
Bank of America Merrill Lynch analyst Wamsi Mohan said in a note out today that there’s still plenty of runway for the stock to move higher and that next year’s 5G upgrade cycle could be significant for the iPhone.
“In cycles with positive returns, Apple shares have gained on average 47% on an absolute basis heading into product launches and 32% on a relative basis,” said the analyst. “In cycles with negative returns, Apple shares have declined on average 11% on an absolute basis heading into product launches and 20% on a relative basis. Given that we just completed a negative return cycle and are heading into launch of a 5G phone we expect that the risk reward remains favorable despite the year-to-date performance.”
Giving Back Some Gains
As noted here on Tuesday, Walgreens Boot Alliance (NASDAQ:WBA) was the best-performing member of the Dow, but the pharmacy operator gave back plenty of those gains today, slumping 2.8% to rank as the Dow’s worst-performing component.
There appears to be growing skepticism that a takeover of Walgreens would materialize in leveraged buyout form or reach the $70 billion (current market capitalization of $50 billion) figure being tossed around. Barron’s suggests that Warren Buffett’s cash-rich Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) will use some of its war chest to acquire Walgreen’s, but there are no guarantees that will happen.
Disney Forecast
Disney (NYSE:DIS) traded slightly lower today ahead of its after-the-close fiscal fourth-quarter earnings report on Thursday. This will be the company’s second reported quarter with the acquired Fox assets. And with the first one being bumpy to say the least, Wall Street will want to see signs of smoothness and accretion this time around.
For the fiscal fourth quarter, Disney is expected to post earnings per share of 94 cents on revenue of $19 billion.
Bottom Line on the Dow Jones Today
The main issues investors have had to contend with in recent months are the U.S.-China trade flap, central bank action and expectations and, more recently, corporate earnings. Let’s focus on the second point for a moment because in the wake of the Federal Reserve’s most recent rate cut, it may be prudent to not expect much more easing over the near-term.
“Many central banks have switched gear this year,” said BlackRock in a recent note. “The European Central Bank cut rates in September for the first time since 2016 and announced a restart of its asset purchase scheme; Brazil’s central bank has cut its benchmark rates to a record low just last week. But some central banks, including the Fed, may be closer to the end of this easing cycle. The Fed signaled a shift to a more data-dependent approach, and we now see a much higher hurdle for it to cut rates again in coming months. Markets are now pricing in just over one quarter percentage point rate cut in the coming 12 months.”
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
