On Tuesday, stocks shook off initial morning trading profit taking. The Dow Jones (DJIA) added 664 points. The index has a good chance of retaking a recent all-time high. The economic data contradicts this market strength. Why and how did the Dow overcome slowing retail sales and falling consumer sentiment?
The top holdings on the Dow Jones have Goldman Sachs (GS), Caterpillar (CAT), and Microsoft (MSFT) at the highest three weightings. Strong performance from the bank, farm and heavy construction machinery, and technology software do not reflect the real economy.
Visa (V), which is on the index, is struggling. McDonald’s (MCD) is trading in a range. Both are sensitive to the retail market and consumers.
The Commerce Department reported on Tuesday that U.S. retail sales grew by less than expected in September. The Conference Board reported that consumer confidence fell to a seven-month low in November. Fewer consumers plan to buy vehicles, houses, and other big-ticket items. Investors should be wary of auto stocks like General Motors (GM), Tesla (TSLA), and Ford (F). Appliance firms like Whirlpool (WHR) might struggle from here.
Glimmer of Hope
The Supreme Court will announce its decision on tariffs ruled by lower courts as illegal. That would take away the inflationary pressures from tariffs and would help companies in the retail sector bounce back.
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