Follow markets long enough and you’re bound to hear some speculation regarding the efficacy of Chinese data. Meaning that there are plenty of folks out there that think economic numbers out of the world’s second-largest economy may not always be accurate.
What is not up for debate, however, is that the number of new cases of the coronavirus from China spiked by 15,000 in the mainland, after the method for counting instances of the deadly respiratory illness was altered. That raises doubts, including in the White House, that China isn’t being entirely forthright with just how bad the situation is there. As a result, stocks meandered Thursday, listlessly drifting between gains and losses.
- The S&P 500 fell 0.16%.
- The Dow Jones Industrial Average 0.43%.
- The Nasdaq Composite lost 0.14%.
- Cisco (NASDAQ:CSCO) was by far the worst-performing Dow name today, plunging 5.23% after revealing tepid guidance for the current quarter.
Overall, these are not dramatic declines considering that it is clear the coronavirus situation is far from resolved. If anything, the scenario may be worsening in China and that presents a potential headwind for riskier assets.
Still, with 14 Dow stocks higher in late trading, Thursday wasn’t a good day nor was it alarmingly bad.
Cisco Conundrum
For tech investors, Cisco just isn’t the growth story it once was. Prospects for the networking gear maker partying like it’s 1999 again appear grim at this point. The company served up guidance for the current quarter of earnings of 79 cents to 81 cents a share while Wall Street was expecting 80 cents.
As I noted earlier this month, Cisco feels a lot more like an International Business Machines (NYSE:IBM) than a Microsoft (NASDAQ:MSFT).
What that means is an ultra-conservative investor may like Cisco for buybacks and dividend growth, but don’t expect much in the way of capital appreciation over the near-term.
Speaking of Microsoft
Microsoft was trading slightly lower at this writing after Judge Patricia E. Campbell-Smith approved Amazon’s (NASDAQ:AMZN) request for a preliminary injunction on the now controversial $10 billion JEDI contract from the Pentagon.
Microsoft, to the surprise of many, particularly Amazon, won that deal and the latter has consistently cried foul since then. Amazon even wants to depose President Trump on the matter.
I’m not an attorney or a law professor, but granting the injunction, which halts Microsoft’s JEDI work, seems to be a slippery slope. What’s to stop any company that loses out on a government contract going forward from pursuing the same action and Campbell-Smith has now established precedent that could encourage sore losers to pursue legal action.
There is a $42 million penalty for Amazon should the judge eventually rule the injunction was unnecessary. No, I’m not bearish on Amazon stock. Quite the contrary, but one gets the feeling between the $42 million (assuming it’s paid) and legal fees, Amazon could find plenty of better ways to spend capital.
Caterpillar Again
Caterpillar (NYSE:CAT) has been getting some run in this space this month and the industrial machinery maker is back again today with good reason.
Goldman Sachs upgraded the Dow stock to “buy” from “neutral,” while lifting its 12-month price forecast on the stock to $168 from $156. Even at $162, the mid-point of that range, that represents decent upside from today’s close around $140.
Bottom Line on the Dow Jones Today
Taking a break from the intraday conversation, I figured I’d pass along some interesting research I came across that’s relevant to owners of Johnson & Johnson (NYSE:JNJ), UnitedHealth Group (NYSE:UNH) and the other Dow healthcare names.
The long and the short of it is, State Street sees opportunity in the group despite this being a presidential election year.
“The current negativity towards health care sets the stage for the sector to potentially surprise to the upside, thanks to its fundamental backdrop combined with secular tailwinds,” said State Street in a recent note. “Health care firms are expected to post the strongest earnings and revenue growth in 2019 of any sector, and over the past three months, analysts have been ratcheting up their 2020 earnings-per-share (EPS) estimates for the sector.”
As of this writing, Todd Shriber did not own any of the aforementioned securities. He has been an InvestorPlace contributor since 2014.