Here Are 3 Hot Things to Know About Stocks Right Now
- The Dow Jones Industrial Average finished down Tuesday as investors monitored the ongoing U.S.-China trade negotiations, and recession worries again emerged.
- Johnson & Johnson (JNJ - Get Report) rose after an Oklahoma judge ruled the company was responsible for helping fuel the state's opioid crisis and ordered it to pay $572 million, less than was sought. Johnson & Johnson is Real Money's Stock of the Day.
- Purdue Pharma and its owners, the Sackler family, are offering to settle more than 2,000 lawsuits against the company for $10 billion to $12 billion, CNBC reported.
Wall Street Overview
Stocks ended down Tuesday as investors monitored the ongoing U.S.-China trade negotiations and recession signs resurfaced.
The Dow Jones Industrial Average burned up early session gains and sank 121 points, or 0.47%, to 25,778, the S&P 500 fell 0.32% and the Nasdaq fell 0.34%. Stocks moved in and out of positive territory for much of Tuesday's session.
Recession fears returned again as the market experienced another inversion of the yield curve, in which the interest rate on longer-term treasury notes such as the 10-year Treasury note, fall below the rate on short-term notes, such as the two-year. An inversion is often viewed as a warning sign of a recession.
The spread between the 10-year Treasury yield and the 2-year rate fell to negative 5 basis points. This was the lowest level since 2007 and at last check, the yield on the two-year Treasury note was at 1.522%, with the 10-year yield at 1.476%.
The 3-month Treasury bill rate also traded higher than the 30-year bond yield.
President Donald Trump claimed Monday from the G-7 summit in France that China had contacted U.S. trade officials and said "let's get back to the table." China's foreign ministry, however, denied knowledge of any such calls.
However, Chinese Foreign Ministry spokesman Geng Shuang said at a press conference on Tuesday that "regretfully, the U.S. has further increased the tax rate on China's exports to the U.S."
"This extreme pressure is purely harmful to both sides and not constructive at all," Geng said, according to CNBC.
"Investors shouldn't expect to see trade wars woes winding down any time soon," said Mike Loewengart, vice president of investment strategy at E*Trade. "And with ongoing trade uncertainty comes potential volatility which can create a pretty hairy landscape for investors. In these environments, it's key to tune out the geopolitical noise. Instead, investors should keep an eye on health metrics of the U.S. economy like jobs, GDP growth rates, housing, and retail sales - these serve as a great barometer for the actual state of play."
Loewengart said a diversified portfolio across market caps, asset classes, and domestic and international holdings can also help weather some of the storms that could lie ahead.
"If an investor hasn't checked in on their portfolio lately, it's beneficial to review it and make sure it falls in line with their goals, risk tolerance, and time horizon," he said.
Gorilla Trades strategist Ken Berman said "the negative intraday trend has been fueled by the declining long-dated Treasuries [rates], the weakness in small-caps, which both signal another, bearish shift in investor sentiment."
"The fact that China hasn't confirmed the 'constructive' phone calls regarding the trade negotiations has been weighing on stocks this morning, and the companies most exposed to China has been leading the way lower," Berman said.
Berman noted that while both nations are willing to take risks to reach a better bargaining position, the market's chaotic reaction fuels the suspicion that Friday's steep selloff, where the Dow finished down more than 600 points, "scared the leaders of both the U.S. and China."
Purdue Pharma and its owners, the Sackler family, are offering to settle more than 2,000 lawsuits against the company for $10 billion to $12 billion, CNBC reported. The potential deal was part of confidential conversations and discussed by Purdue's lawyers at a meeting in Cleveland last week, CNBC said, citing two people familiar with the mediation.
The news follows Tuesday's ruling by an Oklahoma judge who said Johnson & Johnson (JNJ - Get Report) was responsible for helping fuel the opioid crisis in the state and ordered the health-care giant to pay $572 million, far less than the state had sought. Shares were up 1.4% to $129.64. Johnson & Johnson, which said will appeal the verdict, is Real Money's Stock of the Day.
Shares of tobacco giant Philip Morris International (PM - Get Report) dropped 7.7% to $71.70 on Tuesday and rival Altria Group's (MO - Get Report) stock fell 4% to $45.24 after confirmation that the two were discussing a potential all-stock deal that Philip Morris called "a merger of equals."
In economic news, U.S. consumer confidence held up better than expected during the first half of August, a new report showed, even as President Donald Trump escalated his trade war with China, roiling stock-market investors.
Brent crude contracts were up 92 cents and selling at $59.04 per barrel, while West Texas Intermediate contracts, which are more tightly linked to U.S. gas prices, were $1.33 higher at $54.97 per barrel.
Johnson & Johnson, JPMorgan Chase, and UnitedHealth are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks?
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