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Dow Jones Today: A Rebound With an Asterisk

Todd Shriber

After slumping in the first two days of October, stocks rebounded Thursday, but there’s a caveat to go along with today’s gains. Earlier this week, stocks slumped on news of some troubling manufacturing data. However, today’s gains were accrued against the backdrop of more concerning data.

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Today, the Institute for Supply Management (ISM) said its services index fell to 52.6 in September, well below the prior month’s reading of 56.4 and far off economists’ estimate of a September reading of 55.1. Readings above 50 are considered healthy, but this is still a big miss and it won’t do much to allay recession concerns.

The ISM services report is the latest in a recent spate of glum economic data. The tests continue tomorrow with the publication of the September jobs report from the Labor Department. With that in mind, today’s market upside may be a simple case of a rebound after a couple of bad days or expectations that the Federal Reserve will lower interest rates again later this month.

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Today, the Nasdaq Composite snapped back to gain 1.12% while the S&P 500 climbed 0.80%. The Dow Jones Industrial Average added 0.47% with 18 of its member firms pointed higher in late trading. Of those 18, roughly half were up about 1% or more.

Fun With Pfizer

Pfizer (NYSE:PFE), a rare visitor to this space, was the Dow’s top performer today, adding 2.22% on light news. The blue chip pharmaceuticals name is the epitome of a healthcare laggard this year with a loss of more than 20%.

There wasn’t much news behind the Pfizer rally today, but earlier this week the company said it reached a settlement with Genentech and Roche so that Pfizer can introduce its biosimilar bevacizumab, Zirabev, in the U.S. later this year.

Pfizer still needs to gain 13.17% to reclaim its 200-day moving average.

Welcome Back, UTX

It’s been a while since United Technologies (NYSE:UTX) was highlighted here, but shares of the industrial conglomerate posted a modest gain today on some encouraging remarks from Credit Suisse analyst Robert Spingarn. A case can be made that UTX should have been up more today because the analyst is forecasting upside of as much as 37% from current levels.

United Technologies is still working through its merger with Raytheon (NYSE:RTN) and spin offs of its Otis Elevator and Carrier HVAC units, so there’s a lot of complexity and moving parts to the long thesis for the shares, but as Barron’s points out, there could also be considerable upside.

“It is a complicated exercise, but Spingarn said United Tech stock would be worth $164 and Raytheon $230 based on value to be received in a 2020 merger,” according to the financial magazine. “That is about 25% and 20% higher than current stock values, respectively. What’s more, he see upside to $180 for United Tech stock, 37% higher than recent levels, if management executes successfully on growth plans.”


Post-Event Bounce

When talking about Dow technology stocks and product events, the conversation usually involves Apple (NASDAQ:AAPL), but today Microsoft (NASDAQ:MSFT) is the name to discuss.

After tumbling yesterday following a product launch session in New York, shares of Microsoft bounced back today. What’s happening here is that the company is making a push into the hardware arena. Specifically, it’s renewing its smartphone push with a foldable version of the Surface, known as the Surface Duo.

Those familiar with Microsoft know the company has a spotty history in the mobile phone arena, one littered with more failures than successes. The Duo, which is expected to be available in time for the 2020 holiday shopping season, won’t run on Windows. Rather, it will run on Google’s (NASDAQ:GOOG, NASDAQ:GOOGL) Android operating system.

Industry observers are already saying marketing for Duo will be essential and it remains to be seen if Microsoft markets the product as a true smartphone or a tablet from which users can make and take calls.

Bottom Line on Dow Jones Today

Overall, Thursday was a decent day and the first one of that nature since the fourth quarter starter. However, risks linger, namely due to these troubling economic data points. As one potential harbinger of ongoing weakness, oil prices have fallen for eight consecutive days. That would not be happening if market participants were enthusiastic about the global economy.

Barclays was out with a note today saying there’s a 25% to 30% chance of recession over the next 12 months. Those aren’t short odds, but they probably can’t be ignored either.

Todd Shriber does not own any of the aforementioned securities.

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