Stocks tried to extend gains from Monday today, with the S&P 500 at one point coming close to meeting the technical definition on hopes that coronavirus case numbers are flattening out in New York, one of the epicenters of the respiratory illness in the U.S. However, late session selling led to modest losses.
- The S&P 500 fell 0.15%
- The Dow Jones Industrial Average lost 0.18%
- The Nasdaq Composite dropped 0.33%
- In a bit of a surprise, Dow Chemical (NYSE:DOW) led its namesake index higher today, jumping 7%.
Although coronavirus fatalities in New York rose today, the number of cases there and in other trouble spots around the world appear to be flattening, giving investors some impetus to embrace riskier assets. As such the dollar and gold closed lower today, while 10-year Treasury yields rose.
Over the past two days, leadership has been sought from the names most severely punished in the coronavirus downturn, including airlines, casino and cruise line operators and hoteliers. The read-in is that investors are willing to wager that when the coronavirus issue subsides, there will be pent up demand to get out of the house and get back to enjoying life.
It’s not an unreasonable theory and it’s one that benefits higher quality names like Disney (NYSE:DIS). One of the biggest names disrupted by the COVID-19 pandemic, Disney gained 2.47% Tuesday on news that the next “Mulan” movie is coming in July, plus speculation Major League Baseball could start up in May (relevant to the Disney’s ESPN unit) and that Disney theme parks could screen for illnesses going forward. That could be a sign of post-virus life in the U.S. and throughout the world.
In late trading, 20 of 30 Dow stocks were higher.
As noted above, it was arguably surprising that chemical maker Dow was the leader in the blue-chip index today because a case could be made that honor should belong to Exxon Mobil (NYSE:XOM).
XOM, the largest domestic oil company, rallied after saying it would slash 2020 capital spending by 30% and operating expenditures by 15%, joining rivals such as fellow Dow component Chevron (NYSE:CVX) in announcing major spending cuts.
“The largest share of the capital spending reduction will be in the Permian Basin, where short-cycle investments can be more readily adjusted to respond to market conditions, while preserving value over the long term,” according to Exxon.
News of the lower spending is seen as a clear signal XOM will at least sustain its dividend this year, though the jury’s still out on an increase.
Helping the Cause
3M (NYSE:MMM) is trying to work its way out of President Trump’s doghouse after the industrial conglomerate was hit with the Defense Protection Act last week. MMM stock jumped Tuesday after the company said it would import 167 million medical masks over the next three months, while also planning to boost respirator imports.
“3M will import 166.5 million respirators over the next three months primarily from its manufacturing facility in China, starting in April,” according to a statement issued by the company. “The Administration is committed to working to address and remove export and regulatory restrictions to enable this plan.”
It’s Never Sunny in Boeing-land
Boeing (NYSE:BA) was the Dow’s worst performer today, something the stock is making a habit of. Something else the company has been making a habit of is gloomy news flow. Late Monday, Boeing said it’s halting production at its 787 plant in South Carolina. That comes after the company unveiled an indefinite freeze of operations in Washington state.
Bottom Line on the Dow Jones Today
Another takeaway from the last two days of market action, though Tuesday gains wilted late in the session, is that investors are increasingly at peace with first-quarter earnings being dismal, and that’s exactly what they’re going to be.
“The Q1 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q1 for all the companies in the index) declined by 9.1% (to $36.97 from $40.68) from December 31 to March 31,” said John Butters of FactSet in a recent note.
That 9.1% decline is nearly triple the historical average.
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.