Broadly speaking, stocks traded lower, though by not-alarming amounts, for most of Monday before a late-day rally as President Trump renewed a familiar refrain: harsh anti-China rhetoric. Forced to up his novel coronavirus death forecast to 100,000, Trump said the White House is evaluating ways to punish China for its perceived role in the pandemic.
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- The S&P 500 added 0.42%.
- The Dow Jones Industrial Average eked out a gain of 0.11%
- The Nasdaq Composite jumped 1.23%
- On a rough day for the industrial sector, Raytheon Technologies (NYSE:RTX) was the worst-performing Dow name today.
Since Covid-19 morphed from a China-specific issue to global pandemic, theories have run wild regarding the origin of the illness. There’s a conspiracy that it was a man-made “weapon” sourced from a biolab in central China while others claim it was transmitted from animals to humans by way of consumption of some, shall we say unsavory animal meat.
Some theories have more evidence supporting them than others, but the White House is convinced the virus originated in China and as such, Trump is renewing a push for American companies that rely on the Chinese supply chain to bring that production back home, and is considering tariffs to make that a reality.
The tariff gambit is risky considering that U.S. unemployment is close to 20%. The onshoring proposals make somewhat more sense, particularly in an election year when joblessness unexpectedly spiked.
In late trading, 18 of 30 Dow stocks were lower.
Buffett Bashes Boeing
Over the weekend, Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) held its annual shareholders meeting. Among the big takeaways was the company’s divestment of stakes in the four largest U.S. airlines.
That alone would be reason for Boeing (NYSE:BA), which counts passenger airlines among its largest customers, to trade lower, but Buffett compounded Boeing’s Monday weakness by saying the company is getting hard to evaluate.
For Boeing investors hoping Buffett would come along and act as a savior, those hopes are dashed because the Oracle of Omaha famously eschews investments he deems as complex.
Pre-Earnings Jitters
Just over 140 S&P 500 members report earnings this week, with Dow component Walt Disney (NYSE:DIS) among them. That report arrives Tuesday after the bell, but the stock traded lower Monday, potentially signaling investors are looking to bail before the numbers come out.
MoffettNathanson analyst Michael Nathanson downgraded the stock from “buy” to “neutral” today while trimming his price target to $112 from $120.
“We are downgrading Disney to Neutral, not because we have lost faith in [Disney], but rather because we believe there are a number of risks that could lead this unprecedented event to have a longer impact, with earnings revisions massively skewed to the downside,” said the analyst.
Apple Sells Debt
The debt markets are open for business, particularly for companies with strong balance sheets and credit ratings, such as Apple (NASDAQ:AAPL). Proving just how financially sound Apple is, the company sold $2.5 billion worth of 30-year bonds today at a spread of just 140 basis points over comparable U.S. Treasuries.
The iPhone maker said it had $190 billion in cash on hand when it reported quarterly results last week.
Exxon Dichotomy
Exxon Mobil (NYSE:XOM) traded higher Monday, but at least one research firm has some reservations about the oil giant, though they still view the dividend as safe.
“Although Exxon performed well during the quarter the worst is yet to come with CEO Darren Woods indicating April likely marked a trough in demand, but commodity prices and demand remain weak with the path of recovery uncertain,” said Morningstar in a note out today. “Exxon will also see economic shut-ins and curtailments of 400 thousand barrels of oil equivalent per day, or mboe/d, during the second quarter. We continue to view the dividend as safe.”
Bottom Line on the Dow Jones Today
With a big batch of earnings reports due out this week, it’s worth pointing out that, in aggregate, S&P 500 companies are delivering earnings that are 2.6% below estimates, according to Refinitiv data.
If that’s not enough potential headline risk for an investor, the April jobs report, which will likely be ugly, is coming Friday before the market opens.
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.
