The Dow was hit by a triple whammy this week thanks to three components: Boeing, Johnson & Johnson and IBM. Boeing dropped 8.3% after emails showed an employee may have unintentionally misled the Federal Aviation Administration regarding its 737 Max. Johnson & Johnson slumped 3% after the FDA found traces of asbestos in one lot of its baby powder. And IBM reported disappointing sales and fell 6.1%. The trio cost the Dow to end 0.2% lower – for the fourth negative week out of the past five. The S&P 500 index, however, rose 0.5% to 2986.20 and the Nasdaq Composite advanced 0.4%. The Dow Transportation Average had a healthy 2% gain as fuel prices edged lower. Once again, sectors were split fairly evenly with conservative health care and telecom stocks respectively gaining 2.1% and 2.0%. Energy was at the bottom of the list with an average loss of 1.7%.
Most signs point to the Federal Reserve reducing interest rates at its meeting on October 30th. The forecast for a cut largely reflects the diminishing strength of the business expansion. While data still largely suggest sustained improvement, wage growth, non-manufacturing activity, business investment and retail spending is weaker than a year ago. As for inflation, the Consumer Price Index showed scant month-to-month change in September and a 12-month reading that was below the Fed’s preferred 2% target. Globally, the European Union and the United Kingdom agreed to a draft deal on that elusive Brexit that now needs to be approved by the U.K. Parliament. If the deal gets the nod, it will erase one of the big macro-economic wild cards. As for trade, recent weeks have brought increasing optimism, with a consensus emerging that some lessening in tensions with China – or even a limited agreement – will emerge shortly.
Last week’s earnings results were quite encouraging and this week we will hear from blog candidates United Parcel Service, 3M, Gilead Sciences, Intel, Danaher and Verizon. Stocks continue to advance toward record highs, even with the occasional selling squalls. Hence, selective accumulation of quality names – especially on market weakness – remains a sensible approach as investors are taking much of the headline news in stride.
Here is the answer to last week’s trivia question: Trader Joe’s was founded in Pasadena, California as Pronto Markets back in 1958. Today, Trader Joe’s is operated by what supermarket chain? Ahold Delhaize (Food Lion, Hannaford, etc.), Albertsons, Kroger or Aldi. Answer: Germany’s Aldi Nord Group.
Today’s Trivia Question: The United States economy depends on trucks to deliver what percent of all freight transported annually? 55%, 62%, 70% or 78%.