Trade tensions roiled equity markets yesterday, but there was some relief on that front today. The caveat being that today’s global trade news doesn’t involve the U.S. and China. Rather, it’s about the U.S. and Japan.
The world’s largest and third-largest economies, respectively, unveiled a modest accord that opens Japan to $7 billion worth of American-made products. Automobiles, the largest source of the trade deficit between the two countries, are not part of the new pact.
Of course, investors are more focused on the prospects of a trade deal with China, something that looks murky following President Donald Trump’s Tuesday excoriation of China at speech before the United Nations. On the other hand, for those looking to indulge some political whimsy, a case can be made that Trump will find a way to get trade deal with China into place simply to shift the national agenda away from the Democrats’ newly-announced impeachment effort.
Ukraine President Volodymyr Zelenskiy said earlier today he didn’t feel pressured by President Trump to investigate former Vice President and democratic presidential candidate Joe Biden as a way of procuring aid from the U.S.
“We had I think good phone call,” said the Ukraine president. “It was normal. We spoke about many things. I think, and you read it, that nobody pushed it.”
I’m not making calls on what will become of the impeachment push, but today stocks moved higher with the Nasdaq Composite surging 1.05% while the S&P 500 rose 0.62%. The Dow Jones Industrial Average climbed 0.61%. In late trading, 20 of the 30 Dow stocks were in the green.
Nike Runs Higher
Athletic apparel maker Nike (NYSE:NKE) reported earnings after the bell Tuesday and suffice to say, it was a good report because the stock surged 4.14% and was by far the best-performing name in the Dow today. Wednesday’s performance helped Nike stock to all-time highs.
Nike posted fiscal first-quarter earnings of 86 cents a share on sales of $10.66 billion. Analysts expected 70 cents per share on revenue of $10.44 billion. Those impressive numbers from a company that’s as trade-sensitive as Nike. The company is projecting mid-single digit revenue growth for fiscal 2020.
“For the current fiscal year, analysts are calling for Nike to report earnings per share in a range of $2.73 to $3.00, on sales of $42.09 billion,” according to CNBC.
C-Suite Musings
Home Depot (NYSE:HD) gained 1.22% today, participating in broader market bullishness while benefiting from some positive analyst chatter on new CFO Richard McPhail. McPhail, who has been with Home Depot for over a decade, took over the top finance spot at the home improvement retailer earlier this month.
“Not only has McPhail gained exposure to all aspects of the finance organization over his tenure, he’s had the benefit of witnessing various chapters of Home Depot’s growth,” said Jefferies analyst Jonathan Matuszewski in a note out Wednesday.
Dow Detractors
Among the Dow offenders today were consumer staples components Coca-Cola (NYSE:KO) and Procter & Gamble (NYSE:PG). Losses for the stocks, both of which are among the Dow’s best performers this year, were relatively modest, although one analyst was out with commentary saying the consumer staples sector is getting expensive.
Credit Suisse analyst Kaumil Gajrawala mentioned those names along with rivals PepsiCo. (NASDAQ:PEP) and Colgate-Palmolive (NYSE:CL) as some of the staples stocks that look pricey.
“With these stocks trading at 15-year peak valuations, Gajrawala wrote that he is neutral to negative on the space, and is concerned that investors are overlooking necessary investments at some companies, like Pepsi and Coke, that could require ‘years-long spending,’” reports Teresa Rivas for Barron’s.
Bottom Line on the Dow
As I frequently say, do not put too much emphasis on one event. That said, the Nike earnings report was encouraging. Remember, Nike resides in the consumer discretionary sector, an important tell on the strength of the U.S. economy.
Heading into third-quarter earnings and the holiday shopping season, if consumers flex their muscles, recession fears are likely to abate, powering equity markets higher in the process.
Todd Shriber does not own any of the aforementioned securities.