Coming off one of its worst quarterly performances in decades, the Dow Jones Industrial Average saw one of the most ominous starts for a quarter in nearly nine decades as stocks swooned on Wednesday. More April showers could be in store for investors.
- The S&P 500 slid 4.41%
- The Dow Jones Industrial Average tumbled 4.44%
- The Nasdaq Composite lost 4.41%
- New quarter, same old tricks for Boeing (NYSE:BA) stock, easily the Dow’s worst-performing name today as it lost 12%.
On Wednesday, stocks were stung by health officials reporting that the U.S. could hit 240,000 total coronavirus deaths. Adding to the pain were more states moving to shutdown non-essential business for the entire month, dealing another body blow to the already-fragile economy.
On a related note, reports broke earlier today, citing the U.S. intelligence community, that China is concealing both cases and deaths stemming from the coronavirus. Other countries are accused of doing the same, but with one of the first outbreaks occuring in China, it would be helpful to other nations trying to combat COVID-19 to get accurate data.
Overall, it was another glum day for equities, with a theme investors got all-too-cozy with in March. That being 28 of 30 Dow stocks pointed lower in late trading.
More Boeing Problems
For months now, the center of Boeing’s rapidly deteriorating universe has been the 737 MAX passenger jet. However, the company has another problem: the KC-46A Pegasus used by the U.S. Air Force.
That plane has a long history of problems with the most recent being fuel tank leaks. Fuel leaks are never a good thing in the aviation industry, but it’s a really bad scenario for a plane with a primary function of fueling other jets.
Boeing said it’s on top of the issue, but in the wake of the company’s other issues, the optics of the KC-46A Pegasus problem are poor.
Dow financial components, including American Express (NYSE:AXP) and JPMorgan Chase (NYSE:JPM), were sapped today as a slew of British banks announced dividend cuts with prodding from the Bank of England, stoking concerns domestic banks could follow suit.
JPM and Goldman Sachs (NYSE:GS), another Dow stock, were among the big banks announcing scrapped buyback plans last month.
The good news is names like JPM and Goldman have low payout ratios and can easily afford to sustain if not raise dividends this year. The bad news is that if these names and other cut or suspend dividends, there’s essentially no reason to own this group in a low interest rate environment.
Speaking Of Dividends…
Jefferies global equity strategist Sean Darby published a report today highlighting 60 well-known U.S. companies that he says are “susceptible to a dividend cut.” The group includes two Dow components: 3M (NYSE:MMM) and Coca-Cola (NYSE:KO).
Just speculating here, but of that pair, MMM is the more likely dividend offender, but that’s not a given. If either KO or MMM go to negative dividend action, well, let’s just say that would be concerning because both companies boast a payout increase streak longer than 50 years.
It’s not yet earnings season, but some reports are trickling in here and there. Walgreens (NASDAQ:WBA) will join that group tomorrow and with the stock down more than 6% today, it doesn’t look like investors are expecting much out of a name that has been one of the Dow’s worst performers since early 2019.
WBA has a spotty history of post-earnings moves, usually more down than up, so don’t be surprised if there’s more stress on this name to finish the week.
Bottom Line on the Dow Jones Today
Arguably the biggest near-term headwind for riskier assets is a lack of positive news, be it about the coronavirus, the economy or earnings. At this point, even some good dividend news would at least lighten the mood.
The upside of this dour scenario — and it is dour — is that if the virus curve legitimately flattens, that’s a credible upside for equities. There just isn’t any clarity on when that will actually happen.
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.