The new coronavirus from China is still an issue. And it’s one that’s getting worse, not better. However, stocks clung to modest gains Tuesday with the Dow Jones Industrial Average supported by a host of China-sensitive fare.
- The S&P 500 added 0.17%.
- The Dow Jones was flat today.
- The Nasdaq Composite gained 0.11%.
- Dow Inc. (NYSE:DOW) was the blue-chip index’s leader today, something that hasn’t been said in a while, as the materials name has sagged amid coronavirus fears.
In other news today, Federal Reserve Chairman Jerome Powell testified before a House committee (he’ll be before the Senate tomorrow), noting that the U.S. economy remains on firm footing. Predictably, Powell did not make overt comments on the central bank’s plans for interest rates this year.
Looking at Dow offenders today, an obvious one is Verizon (NYSE:VZ), which was stung after a New York judge signed off on Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS) completing their merger, which will lead to the creation of the country’s number three mobile carrier.
In late trading, 16 of the Dow’s 30 members were in the green.
Cisco Systems (NASDAQ:CSCO) and Intel (NASDAQ:INTC) were the exceptions, but the other Dow technology stocks traded lower today on news that the Federal Trade Commission (FTC) is reviewing past acquisitions by some tech giants.
On the Dow, this is relevant to Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). The FTC voted 5-0 in review of the acquisition review order. Interestingly, some market observers are making a case for Microsoft spinning off its fast-growing cloud business, Azure. That might help the company deflect some regulatory scrutiny if it chooses to go that route.
For Apple, the FTC is likely looking into what are known as “discreet deals,” something the company does multiple times a month, but doesn’t reveal because the transactions are small and usually about gaining intellectual property.
Be Careful Here
As has been widely noted, the energy sector was a mess in January. In fact, it was the only one of the 11 sectors represented in the S&P 500 that traded lower last month.
More recently, Dow components Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) have steadied. Both were among the Dow’s winners today and Chevron is up more than 4% over the past week. Yes, there is value to be had in the energy patch, but valuations are depressed for a reason. Investors may want to wait for a bit “show me” out of Exxon and Chevron before rushing in.
The New Hampshire Democratic Primary is taking place today and, perhaps surprisingly, all but one of the Dow’s healthcare stocks was in the green. Merck (NYSE:MRK) was the offender, but only in slight fashion.
The bigger surprise is that UnitedHealth Group (NYSE:UNH) was one of the Dow’s better performers today, potentially a sign that markets are at peace with Sen. Bernie Sanders notching another strong showing tonight. That or markets don’t see the Vermont senator as a credible threat in a matchup against President Trump.
Bottom Line on the Dow Jones Today
I’m usually a fan of the notion that history doesn’t always repeat, but it often rhymes. Hopefully, that proves to be the case with the coronavirus.
“What can we learn from past global disease outbreaks? Economic growth and markets have historically responded with a V-shaped pattern,” said BlackRock in a recent note. “The temporary hit to economic activity results in pent-up demand, which eventually helps fuel the rebound in economic activity. This recovery is typically led by retail and manufacturing sectors, since lost revenues are harder to recoup in the services sector (think of tourism).”
For those looking for another earnings trade on the Dow, Cisco reports after the close tomorrow and to say expectations are tepid at best may be an understatement.
As of this writing, Todd Shriber did not own any of the aforementioned securities.