Stocks rallied Thursday due to a familiar catalyst: positive trade talks. However, this time could be different because the U.S. and China have agreed, in principle, to Phase I of a trade deal. That accord now awaits President Donald Trump’s signature.
Source: Courtesy of Finviz
- The S&P 500 surged 0.86%
- The Dow Jones Industrial Average soared 0.79%
- The Nasdaq Composite advanced 0.73%
- In a case of a pleasant surprise, Cisco Systems (NASDAQ:CSCO) was one of best-performing names in the Dow today, adding an impressive 3.08%.
In the first paragraph, the operative phrases are “in principle” and “awaits President Donald Trump’s signature” because investors have been down this road before. Phase I of the trade deal should have been signed last month, but for a variety of reasons, that obviously didn’t happen.
“U.S. negotiators have reached the terms of a phase-one trade deal with China that now awaits President Donald Trump’s approval, according to people briefed on the plans,” reports Bloomberg.
Investors can and do have varying views on President Trump, and it is their right to do so, but regardless of one’s opinion of his presidency, it’s hard to argue against his shrewdness. Meaning, he’s aware that we’re almost in an election year and clouds created by a stormy relationship with China do more harm than good for his reelection prospects.
Trump said in a tweet earlier today that both sides want the trade deal to happen. That’s certainly encouraging and very likely why 25 of the Dow’s 30 components were higher in late trading, one of the better ratios over the past several weeks.
Bad News First
Getting the bad news out of the way first, Boeing (NYSE:BA) was the worst offender on the Dow Jones today and the only one with a loss in the neighborhood of 1%. The company said today it has reached a $125 million with Southwest Airlines (NYSE:LUV) regarding the grounding of the 737 MAX passenger jet, but as is often the case with news on that front, there’s more to the story.
The more likely culprit behind Boeing’s Thursday woes was Federal Aviation Administration chief Steve Dickson saying the company is giving unrealistic timelines about when the 737 MAX will be flying again.
Remember, it’s the FAA’s call, not Boeing’s, about when the plane becomes flight-ready again.
Apple Surprise
It was surprising to see Apple (NASDAQ:AAPL) scuffle on a day when positive trade news dominated the headlines, but the stock is higher by more than 3% this month and there was plenty of good news to go around today.
Should President Trump quickly sign the trade deal, that means the tariffs set to go into effect on Sunday will be averted and that’s positive for Apple.
Those levies would have increased the price of already pricey iPhones, iPads and MacBooks by 15% at arguably the worst time of the year to raise prices on any consumer product.
Cisco Surge
As noted earlier, previously moribund Cisco was the Dow leader today on news the company is getting into the semiconductor and has already procured data-center operators, such as Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB), as clients.
Edward Jones upgraded Cisco to “buy” from “hold,” adding to the stock’s Thursday upside.
Jumpin’ JPMorgan
JPMorgan Chase (NYSE:JPM) was competing with Cisco for top honors on the Dow Jones today as the largest domestic bank was flirting with gains of 3%.
Tuesday after the bell, JPMorgan announced that it’s making significant alterations to its wealth management businesses.
“JPMorgan will put its U.S. wealth management business for affluent clients, its network of financial advisors at Chase branches, and its new You Invest online brokerage all together in one unit. JPMorgan will keep its private bank for the ultra-wealthy separate,” reports Barron’s.
Looking Ahead
This is an ideal time of year to start considering sector bets for the new year and healthcare appears to merit evaluation. Today, each of the Dow’s healthcare names, a group including Johnson & Johnson (NYSE:JNJ) and Pfizer (NYSE:PFE), traded higher and it appears that some market observers are bullish on blue-chip pharmaceuticals names for 2020.
“For Major Pharma, we remain constructive on the group and see the potential for a recovery year in 2020 after the sector underperformed the broader market in 2019,” said J.P. Morgan in a note out today.
Bottom Line on the Dow Jones Today
Speaking of looking ahead, the current forecast for 2020 S&P 500 earnings per share (EPS) is pretty sturdy and implies some upside to come for stocks in the new year.
“For 2020, the bottom-up EPS estimate (which reflects an aggregation of the median EPS estimates for all of the companies in the index) is $178.57. If $178.57 is the final number for the year, it will mark a record-high EPS number for the index,” notes FactSet research.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
