Monday brought a tale of two markets for the U.S. and China — the world’s two largest economies. Domestic equities rebounded following last Friday’s slide. U.S. stocks were boosted by a report from the Institute for Supply Management (ISM), which indicated its manufacturing activity index climbed to 50.9 last month from an upwardly revised reading of 47.8 in December. Readings above 50 are considered positive.
- The S&P 500 advanced 0.73%.
- The Dow Jones Industrial Average gained 0.51%.
- The Nasdaq Composite soared 1.34%.
- Nike (NYSE:NKE) was the Dow Jones leader today as the stock earned an analyst upgrade even as amid some legal controversy
Earlier today, China confirmed that there have been 361 coronavirus fatalities on the mainland, topping the 349 seen during the 2002-2003 SARS epidemic. To this point, there has been just one death outside of China (in the Philippines) and the number of total deaths is well below the roughly 800 suffered during the SARS outbreak, but plenty of market observers and health experts are now making SARS comparisons.
Prior to the open of Monday’s China trading session, the first time markets there have been open in two weeks, Beijing implemented a slew of controls, including a short selling ban and liquidity injection, none of which could prevent stocks there from plunging. The gambit was similar to some of the efforts used in the U.S. at the height of the global financial crisis and proved equally as ineffective.
U.S. stocks proved somewhat resistant to the China fallout with about two-thirds of the Dow’s 30 members pointed higher in late trading.
Nike Runs Higher
It was an interesting day for Nike to say the least. The athletic apparel and footwear king is deal with the Michael Avenatti trial, one it will likely ultimately win. However, the federal government is looking into Nike’s role in a grassroots basketball scandal that has ensnared several assistant coaches of big-name colleges across the country.
Rumors are swirling that Nike and some of its rivals may have directed cash to some high school hoops phenomenons to persuade those players to attend colleges that the companies sponsor. Investors should note that is investigation could take awhile to play out and it appears that Wall Street isn’t overly concerned about it.
J.P. Morgan Securities added Nike to its focus list today while modestly raising its price target on the name to $111 from $110, noting that the recent weakness in the name is a buying opportunity.
Good For Goldman
Goldman Sachs (NYSE:GS) traded higher today on reports that the company is in talks with Amazon (NASDAQ:AMZN) to possibly offer loan products to Amazon merchants. Neither company confirmed the speculation, but assuming it’s true, it jibes with Goldman’s efforts to bolster its consumer-facing operations as it moves away from trading in a bid to boost profits.
Even Apple’s Not Immune
Apple (NASDAQ:AAPL) traded slightly lower today and while some investors may be focusing on the headlines that the company closed its retail stores and corporate offices in China due to the coronavirus, the issue isn’t so much the stores as it is how the illness could affect the Apple supply chain. The company itself the store closures will have a minimal impact.
“The real question to us is whether channel inventories work down materially, should production plants of Apple’s semiconductor components or Foxconn’s own plants be disrupted in any material way in the coming weeks,” said Deutsche Bank’s Jeriel Ong in a note out today.
Monday was another brutal day for oil prices and Dow component Exxon Mobil (NYSE:XOM) wasn’t spared in the fallout. In fact, the largest U.S. oil company was the Dow’s worst-performing name today, shedding 2.2%.
Last week, the company “reported fourth-quarter earnings that continue to reflect the macroeconomic headwinds the company is facing across all parts of its business, which are weighing on earnings and cash flow,” said Morningstar in a note out today.
Search around news sites, prediction sites and political punditry and it’s clear the consensus is that Medicare For All supporter Sen. Bernie Sanders is likely to win the Iowa caucus tonight. Mr. Market may be signaling a different outcome as UnitedHealth Group (NYSE:UNH), easily the Dow component most vulnerable to Sanders momentum trader higher today, gaining 0.61%. Make of that what you will.
Bottom Line of the Dow Jones Today
No, the Dow didn’t come close to clawing back all of last Friday’s 600-point tumble, but the rebound has to start somewhere and it’s impressive that it started against a challenging backdrop today. One wildcard to consider is that, on a historical basis, February isn’t a great month for stocks. Perhaps today’s upside will set the stage for a reversal of that trend.
As of this writing, Todd Shriber did not own any of the aforementioned securities.