Afternoon Note
A rising tide doesn’t lift all boats. Crosscurrents are playing a role in today’s split market. Trade related names are on the rise, stocks like Boeing (BA +1%), Caterpillar (CAT +1.25%), 3M (MMM +0.85%) and Deere (DE +1.50%) are powering the Dow Jones Industrial Average higher. Physical commodities and companies that mine those commodities are seeing strength. Gold, silver and copper are trading higher by 1.5%, 2.36% and 0.85%, respectively. Metals mining company Freeport-McMoRan (FCX) is garnering interest as it trades higher by 2.77%.
Although West Texas Intermediate crude oil is flat today, it is holding above the psychological important $75, and is up approximately 4.5% since last Friday. Transports and retail stocks are weak off rising crude oil. The Retail Etf, XRT, is lower by 1.66%, and the Dow Transportation Index is lower by 0.90%. Delta (DAL) guided EPS lower at its investors day and is trading lower by 3.50%.
The small cap Russell 2000 is lagging today, as investors rotate out of the sector. Previously, investors were hiding out in the Russell 2000 as a safe haven in fear of trade wars. That fear is now subsiding. The Russell 2000 has approximately 18% of its holdings in financials. Financials are under pressure, the Regional Bank fund, KRE, is down 0.90%.
Chinese stocks are trading lower after the deal between the U.S., Canada and Mexico to revamp the NAFTA was reached. The new deal has a provision in it that essentially allows the U.S. to exit the USMCA if Canada or Mexico cut a deal with a non-market country, such as China, that it does not care for. According to text of the deal, "Entry by any Party into a free trade agreement with a non-market country, shall allow the other Parties to terminate this Agreement on six-month notice and replace this Agreement with an agreement as between them (bilateral agreement)."
In addition, Bank of America/Merrill Lynch (BAC) analysts joined JPMorgan Chase (JPM) in downgrading forecasts for the Chinese yuan and other Asian currencies in recent days. Tensions remain in focus between the U.S. and China after the Chinese navy dispelled an American missile destroyer from near the South China Sea islands. With the revamping of NAFTA, a trade deal with China starts to garner less attention.
The Dow is currently trading at a new all-time high at 26,793, up 142 points (0.54%). The S&P 500 (+0.20%) is 10 points away from its previous all-time high at 2,940. The Nasdaq is slightly higher by 0.10%. Semiconductor stocks (1.23%) are helping the Nasdaq, while biotechnology stocks (0.56%) are hindering.
Breadth:
· NYSE declines 1,621 to advances of 1,327; new 52-week highs 36 to new lows 122
· Nasdaq declines1,800 to advances of 1,130; new 52-week highs 32 to new lows 108
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