Stocks were roiled Thursday by the return of headline risk, which was compounded by the variety of that risk — it was both domestic and foreign in nature.
Starting in the latter category, China appears intent on adding another chapter to the long-running trade saga with the U.S. Today, the world’s second-largest economy sounded cool on the idea of the two sides reaching a more comprehensive trade accord. Beijing appears steadfast in the view that no more concessions will be made until the U.S. budges on hot button issues.
“Chinese policy makers are gathered in Beijing for a key political meeting that’s set to conclude on Thursday,” reports Bloomberg, citing sources close to the talks. “In meetings ahead of that plenum some officials have relayed low expectations that future negotiations could result in anything meaningful — unless the U.S. is willing to roll back more of the tariffs. In some cases, they’ve urged American visitors to carry that very message back to Washington, the people said.”
Here in the U.S., in what President Donald Trump is calling the biggest witch hunt in our country’s history, the House of Representatives voted, mostly along party lines, 232-196 to proceed with impeachment of the 45th U.S. president. Assuming this effort makes it out of the Democrat-controlled House, it will almost certainly die in the Republican controlled Senate.
Still, Mr. Market isn’t a high school government class expert, but he is an expert in gauging uncertainty. Uncertainty is undesirable in financial markets, but that’s exactly what the impeachment proceedings are creating.
So that gets us to the Nasdaq Composite falling by 0.14% while the S&P 500 retreated by 0.3%. The Dow Jones Industrial Average fell by 0.52% with just five of its 30 holdings in late trading, one of the worst ratios seen in weeks.
Thank Goodness for Apple
Investors cringing at the thought of how bad things could have been today for the Dow if not Apple (NASDAQ:AAPL) are right to feel that way. Apple, the third-largest member of the price-weighted Dow, gained 2.26% today and was easily the best performer among the thinly populated club of Dow gainers.
Thursday’s bullishness in Apple came after the company reported a blowout set of fiscal fourth-quarter results after the close Wednesday. Apple notched earnings of $3.13 on revenue of $64.04 billion while Wall Street was expecting earnings of $2.84 on revenue of $62.99 billion. Declines in iPhone sales moderated and there was solid growth in other areas of the company’s businesses.
“The company posted 18% growth in services, nearly 17% growth in iPad sales and 54% growth in wearables, driven in particular by AirPod sales,” according to Barron’s.
On A Related Note…
Walt Disney (NYSE:DIS), a soon-to-be competitor of Apple’s in the streaming entertainment war, was one of the other Dow winners today, albeit in modest fashion. Disney reports earnings for the quarter on Nov. 7, with analysts expecting EPS of 95 cents on revenue of $19.03 billion.
News that Disney’s European Riviera Resort project is set to be operational by mid-December was viewed as one of the reasons for the stock’s small gain today.
Sour Cyclicals
It was a rough day for cyclical stocks, such as Caterpillar (NYSE:CAT) and 3M (NYSE:MMM). That pair have endured plenty of rough days this year, but news that the US/China trade issue is, well, still an issue, pressured Caterpillar today. Both of those stocks fell more than 2% today.
The Chicago Purchasing Managers Index (PMI) and China’s PMI, data points released earlier today, were seen as bad and that was enough to weigh on cyclical names.
The likes of Caterpillar and 3M could be tested again Friday with the October jobs report and the Institute for Supply Management’s October survey due out before the bell.
Bottom Line on the Dow Jones Today
November starts on Friday, and let’s hope history holds true to form because the eleventh month of the year is usually kind to equities. Over the past 20 years, the Dow has averaged November gains of 1.6%, the third-best month of the year for the blue-chip index, while closing higher in the month 70% of the time.
Interestingly, industrials are one of the best-performing sectors on a historical basis in November. The aforementioned weakness in 3M and Caterpillar could test that thesis this year.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.