Dow Jones Today: Stimulus Chatter Provides Lift, But We Aren’t Out of the Woods Yet

Stocks rallied Tuesday as the White House confirmed it is evaluating a massive $1 trillion to $1.2 trillion stimulus package that could include direct payments to Americans to shore up an economy ravaged by the effects of the coronavirus pandemic.

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  • The S&P 500 jumped 5.59%
  • The Dow Jones Industrial Average rose 5.20%
  • The Nasdaq Composite added 6.23%
  • For the first time in what feels like an eternity, Dow Chemical (NYSE:DOW) was the best-performing name in the blue-chip index, as the chemical maker surged 19.45%.

At this juncture, upside of any variety is certainly welcomed, but Tuesday’s gains barely dent the double-digit losses incurred by the major averages on Monday and do little more than scratch the surface of some dismal March performances.

With consumer stocks flailing over the impact of social distancing measures, putting some extra cash in the hands of Americans is a good idea, particularly when acknowledging our economy is largely dependent on consumer spending. On that note, it’s disappointing that Disney (NYSE:DIS) and McDonald’s (NYSE:MCD) were among the Dow losers today.

In late trading, 25 of the 30 Dow stocks were in the green with Boeing (NYSE:BA) again ranking as the worst offender after it became apparent the White House supports the idea of some type of bailout for the beleaguered aerospace firm.

Chips Not Down Today

Intel (NASDAQ:INTC) participated in the broader market rally in spectacular fashion, soaring 11.14%. This was very much a symptom of stocks rallying in general with some support from the all-important technology sector, but Intel did offer some interesting news, particularly for investors mulling the compelling artificial intelligence space.

Intel installed an algorithm on its Loihi chip “that mimics the olfactory systems observed in mammals that are responsible for learning and identifying smells,” reports ZDNet.

This isn’t so much about the utility of building computers that can smell, which would be nifty, but probably have limited use cases. However, it does underscore the vast expanse and capabilities of the artificial intelligence investment theme.

Defensive Darlings

Consumer defensive stocks have belied their reputations during the March market meltdown, but that wasn’t the case today as Walmart (NYSE:WMT) was the Dow’s third-best performer behind Dow and Intel after Oppenheimer upgraded the largest retailer to “outperform” from “market perform.”

“As we look forward, we believe the company is well positioned to still deliver on financial targets, and shares could benefit from money flows shorter-term as investors likely continue to seek safety in a more uncertain global economic backdrop,” according to the research firm.

Procter & Gamble (NYSE:PG) joined the party, ranking among the top five Dow stocks today, after Deutsche Bank upgraded the consumer products giant to “buy” from “hold.”

The bank sees “PG as highly capable of outperforming investors’ fundamental expectations over the next 12 months—driving compelling absolute upside (+20% base case),” according to a note.

Mixed Apple News

Apple (NASDAQ:AAPL) was among the Dow winners today, notching a solid gain despite some mixed news on the stock out of Goldman Sachs.

Analyst Rod Hall lowered his price target on Apple to $265 from $300 while noting the coronavirus situation could crimp demand for Apple products into May. The good news is things should get better in the back half of the year.

“Given all of this, we are moving to a central thesis that assumes incremental demand weakness in large global markets up through mid-May with impacts attenuating after that,” Hall wrote in a client note. “If demand impacts are ultimately as severe as those we have seen in China then our model may prove optimistic.”

Bottom Line on the Dow Jones Today

Morgan Stanley and Goldman Sachs are confirming that the U.S. is in a recession with much of that thesis revolving around the coronavirus causing a larger-than-expected economic disruption in China. Again, this is a second half story with both banks forecasting rebounding economic activity in the latter part of 2020.

That could mean that this recession and bear market are neither deep nor long running, but chastened investors are likely to demand more than $1,000 from Uncle Sam before running back into riskier assets.

Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.

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