The Federal Reserve again lowered by interest rates by 25 basis points today — the central bank’s third rate cut this year — but as was the case following last month’s rate reduction, stocks did a whole lot of nothing following the news.
Fed speak may have been the culprit behind the tepid reaction to the rate cut news by equities today. In its statement, the Federal Open Market Committee (FOMC) didn’t say anything about acting “as appropriate to sustain the expansion,” which some market participants took to mean that after today’s cut, the central bank will be on hold for the foreseeable future.
On a related note, there was some good news on the economic data front today with the Commerce Department saying third-quarter GDP grew 1.9%. While that’s below the 2% level seen in the second quarter, the initial third-quarter reading is better than the 1.6% economists expected.
Importantly, that data set featured a 2.9% increase in consumer spending, well ahead of the 2.6% economists expected. There are no guarantees, but today’s data points augur well for the October jobs report due out Friday.
On Wednesday, the Nasdaq Composite gained 0.33% while the S&P 500 added 0.33%. The Dow Jones Industrial Average tacked on 0.43% with 21 of its 30 components finishing to the upside.
Quick Update
On Tuesday, I noted that shares of Johnson & Johnson (NYSE:JNJ) were halted late in the session for pending news. The blue-chip pharmaceuticals name rallied 2.78% today, good for one of the best performances in the Dow, after revealing that a test showed no traces of asbestos in its popular baby powder.
However, there’s more to the story, indicating that investors may want to take the positive JNJ news with a grain of salt. The lab that conducted the test that turned up the no asbestos result is run by an expert witness that receives compensation from JNJ, according to a Reuters report.
“Andreas Saldivar, laboratory director of AMA Analytical Services Inc, has served as a litigation expert on several occasions for J&J since 2017 in its defence against plaintiffs’ claims that asbestos in talc caused their cancers,” according to Reuters.
Pre-Earnings Glance
Remember that Apple (NASDAQ:AAPL) reports earnings after the bell today. The stock traded slightly in advance of that report, but there was some good news on the name out today. A Bloomberg article that ran late Tuesday indicates Google’s newest smartphone, the Pixel 4, has lost its long-held camera lead to the recently launched iPhone 11.
“With the iPhone 11 and 11 Pro, Apple closed the photography gap with better low-light image quality,” according to Bloomberg. “Its camera software also makes those photos easier to take by automatically enabling night mode when required. Apple remains way ahead of any other phone maker when it comes to video quality.”
November Idea
The eleventh month of the year starts on Friday and for investors looking for stocks to buy in November, Dow component McDonald’s (NYSE:MCD) is a name that makes some sense due to its propensity for bullish November performances.
Over the past 10 years, McDonald’s has averaged a November gain of 3.32% and finished higher in all 10 of those November’s.
Other November ideas include any of the Dow’s industrial names (20% of the index) and perhaps chemicals maker Dow Inc. (NYSE:DOW) due to favorable seasonality for the industrial and materials sectors in the eleventh month of the year.
Bottom Line on the Dow Jones Today
One quick U.S./China trade update: the meeting at which President Donald Trump was scheduled to sign Phase 1 of the trade deal was canceled due to political chaos in Chile, so expect updates on that scenario in the coming days. As for what to expect into year-end for domestic stocks, assuming the trade deal remains on course and data remains solid, a slow slog higher is probably what’s in store.
“We think 2019 could be similar (to 2016) but acknowledge this time could be riskier simply because the cycle is older and the economy has less slack to offer a buffer,” said BlackRock in a recent note. “Yet we don’t see this as the end of the economic expansion―or equity gains. End of cycle is usually marked by spiking commodity prices, wages that are rising too quickly, and the Fed lifting rates to avert economic overheating. None of these are evident today. In fact, it’s just the opposite. One potential upshot: A continuation of slow growth and a stock market that can grind higher.”
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.