For what seems like the first time in an eternity, stocks enjoyed a good day Tuesday. Much of that had to do with President Donald Trump pledging to back off of threats to levy fresh tariffs on Chinese imports starting next month.
Citing “health, safety, national security and other factors,” the U.S. Trade Representative (USTR) said that new tariffs on certain consumer-related items would be delayed until mid-December. That announcement came as officials from the U.S. and China, the warring factions in the trade spat, agreed to hold talks again in a couple of weeks.
“Separately, China’s Commerce Ministry said Vice Premier Liu He had spoken by phone with U.S. Trade Representative Robert Lightizer and Treasury Secretary Steven Mnuchin and they agreed to talk again in two weeks,” according to CNBC.
As recent history shows, trade talks between the U.S. and China can turn on a dime, but at least for today, the news was good and that was enough to send the Nasdaq Composite higher 1.95% while the S&P 500 rose 1.47%. The Dow Jones Industrial Average tacked on 1.44%.
Something that has not been said here very often in recent weeks: in late trading, all 30 members of the Dow Jones Industrial Average were in the green.
Tech Tops the Dow
Since stocks rallied due to trade news, it is not surprising that tariff-sensitive technology stocks were among Tuesday’s big winners, including Dow components Apple (NASDAQ:AAPL) and Intel (NASDAQ:INTC), which added 4.23% and 2.72%, respectively.
“Further, as part of USTR’s public comment and hearing process, it was determined that the tariff should be delayed to December 15 for certain article,” said the USTR. “Products in this group include, for example, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”
That list includes several products that Apple makes and Intel has some exposure to. So while today’s pops in those names wasn’t surprising, the moves higher were nonetheless embraced by investors.
Not to be a downer, but this is an appropriate time to remind readers of just how sensitive technology stocks, including Apple, are to trade tiffs. You’ve probably experienced that phenomenon first hand this year, and data confirm the sector’s export-heavy tendencies. In a note out today, S&P Dow Jones said S&P 500 technology companies got just over 58% of their 2018 sales from ex-U.S. markets, well above the 42.90% rate for the S&P 500 overall.
More Dow Winners
Ahead of Thursday’s earnings reports Walmart (NYSE:WMT) jumped 2.21% today, but this was a tariff sympathy play. Looking at the list of items mentioned by the USTR, Walmart sells all of those things and the largest U.S. retailer hawks plenty of goods made in China.
If the positive trade vibes stick, that is meaningful for Walmart ahead of the holiday shopping season because the company is a major seller of computers, toys, and video game-related fare. Additionally, many Walmart shoppers are price-sensitive. The idea of the retailer having to pass on tariff costs to consumers is largely viewed as unappealing to investors.
Athletic apparel giant Nike (NYSE:NKE) gained 1.67% today. Again, this is a pretty simple scenario to explain: the USTR list mentioned “certain items of footwear and clothing” and Nike certainly makes “certain” clothing and footwear items.
Bottom Line: Broad-Based Strength on the Dow
I’m fond of saying in this space that investors should not get too caught up in the gyrations of a single trading day, no matter how good or bad. However, another bright spot to consider is how broad the strength was.
What I’m getting at is, plenty of Dow stocks that are not tariff-sensitive joined Tuesday’s party. For example, all of the index’s financial services names finished in the green while UnitedHealth (NYSE:UNH), a company with essentially no China exposure, surged 2.50% to finish as the third-best Dow performer behind Apple and Intel. Indeed, that’s a positive sign.
Todd Shriber does not own any of the aforementioned securities.