Investors have been hearing plenty about geopolitical risk recently, but it has been mostly of the U.S.-China trade variety. That script flipped Thursday after two oil tankers were attacked in the Gulf of Oman, sending crude prices and stocks higher on the day.
The tankers had just passed through the Strait of Hormuz near Iran, one of the world’s most important areas for oil transport, before being attacked. About a third of all oil shipments that are moved by tanker ships pass through the Strait of Hormuz. Secretary of State Mike Pompeo said Iran was responsible for the attacks.
On the back of that news, the United States Oil Fund (NYSEARCA:USO), which tracks West Texas Intermediate futures, jumped 2.26%.
Speaking of gains, they were more modest for the major U.S. equity benchmarks as the Nasdaq Composite and the S&P 500 added 0.57% and 0.41%. The blue-chip Dow Jones Industrial Average posted an even more modest gain of 0.39%.
Usual and Unusual Suspects
With oil trading higher, it was not surprising that two of today’s Dow winners were Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), the two largest U.S. oil companies. While there was an obvious catalyst to spark the energy sector, it was one of the Dow’s consumer discretionary names that led the index higher today.
Shares of media and entertainment giant Walt Disney (NYSE:DIS) soared nearly 4% after Morgan Stanley issued some bullish commentary on the name. Morgan Stanley boosted its price target on Disney to $160 from $135 today, noting that the company’s streaming service, Disney+, is a credible threat to Netflix (NASDAQ:NFLX).
“Stepping back and admittedly taking the long view, investing in Disney shares is a play on the durability of its IP,” said Morgan Stanley analyst Benjamin Swinburne in a note out today.
The analyst has an “overweight” rating on Disney stock. Speaking of analyst commentary, Boeing (NYSE:BA), the Dow’s largest component and a stock frequently highlighted in this space, traded slightly higher despite research firm Berenberg lowering its price target on the aerospace giant to $415 from $430.
In the unusual suspects category, Dow Inc. (NYSE:DOW), the lone materials stock in the Dow Jones Industrial Average, added to its recent hot streak. While the materials sector is one of the smallest sector weights in the Dow and the S&P 500, keeping attention lavished upon the group to a minimum, the group is surging this month and is on pace for its best monthly performance in four years.
Bottom Line for the Dow Jones Today
Looking at the broad benchmarks, this weeks’ market action makes it feel as though the summer doldrums are setting in, but investors should not get complacent. There are just a couple of weeks left in the second quarter and when July arrives, so will the start of another earnings season. In advance of that, investors may want to evaluate how their portfolios are exposed to international revenue streams and the lingering trade spat with China.
Expect to hear plenty of about internal revenue exposure on upcoming second-quarter earnings calls and how that affected results and could impact earnings over the remainder of 2019.
“The estimated earnings decline for the S&P 500 for Q2 2019 is -2.3%,” according to FactSet research. “For companies that generate more than 50% of sales inside the U.S., the estimated earnings growth rate is 1.4%. For companies that generate less than 50% of sales inside the U.S., the estimated earnings decline is -9.3%.”
Todd Shriber does not own any of the aforementioned securities.
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