Morning Calm. Stocks seem ready for a relatively quiet day, with major indexes drifting slightly lower ahead of the open as trade remains the main investor focus. In today's Morning Movers we…
•Talk about trade yet again;
•Highlight other areas of hope;
•And note JPMorgan Chase's (JPM) dividend increase.
Easing trade fears are behind a relatively quiet morning, with major indexes edging down marginally ahead of the open of regular trading.
Dow Jones Industrial Average futures are 0.1% lower, while S&P 500 futures and Nasdaq Composite futures are off 0.2%. Stocks moved little after August housing data, which showed starts ran at a 1.282 million seasonally adjusted annual rate.
We saw markets shrug off trade tensions Tuesday, with perhaps the easiest advice being to hold tight. At this point, it's anyone's guess when we'll have a breakthrough on the trade front, writes Independent Advisor Alliance's Chris Zaccarelli: Maybe China will give in, or maybe the market will finally start to reflect trade fears and force the White House to the negotiating table.
In the interim, Zaccarelli is taking a wait-and-see approach, while stocking up on cash to buy into pullbacks. "I'm reluctant to rotate into more defensive sectors as they are likely to be whipsawed when a detente is finally announced, but the market is more vulnerable to a pullback right now than at any other time this year since the irrational exuberance we experienced in January," he says.
A degree of caution may not be a bad idea, given that the strength of domestic data has fueled optimism in the face of trade, but that's not an inexhaustible resource. As U.S. Bank Wealth Management's Terry Sandven notes, consensus estimates for this year through 2020 are "inching higher, albeit at a slowing rate." Sure, the slowing earnings growth in 2019 shouldn't come as much of a surprise, given this year's blistering pace and more measured expectations. "Nonetheless," he warns, with equities near all-time highs "it is difficult to envision multiple expansion in an environment where the pace of earnings growth is slowing."
Still, not many share his view that stocks can't continue to push higher. After all, global stocks have already been pricing in a trade war, going by emerging markets' decline, as Citigroup's Steven Wieting highlights. Some metrics indicate that non-US shares have diverged from fundamentals by the biggest margin since 1994. "Such periods are typically followed by recovery," Wieting argues.
And maybe we'll finally get something new to talk about. The pattern of phased-in tariffs and threats point to a White House still aiming for talks and concessions, writes Wieting. Yet at the same time, progress on the North American Free Trade Agreement and European talks "suggest the trade war can indeed become less dominant in market attention over time…The global economic outlook is far brighter away from the trade gloom."
Let the sunshine in.
E*Trade Financial (ETFC) is up 2.2% to $54.50 after Jefferies upgraded it to Buy.
JPMorgan (JPM) is up 0.5% to $144.39 after raising its dividend to 80 cents a share from 56 cents previously.
Noble Corp. (NE) is down 2% to $6.08 after Morgan Stanley initiated coverage with and Underweight rating.
Novartis (NVS) is down 1.1% to $84.23 after the U.K.'s National Institute for Health and Care Excellence said its leukemia drug Kymriah is too expensive for CAR-T therapy for adult lymphoma.
Transocean (RIG) is up 5.7% to $12.27 after Morgan Stanley initiated coverage at Overweight and Wells Fargo upgraded it to Outperform.