Is Lowered Guidance from Some Industrial Stocks Affecting Sector?



Industrial sector in April

In the previous parts of this series, we discussed how the broader market S&P 500 Index (SPY) and major sectors of the S&P 500 Index performed in April. Modifications in Donald Trump’s import tariff imposition and companies’ 1Q18 earnings played important roles in market movement in April 2018.

The Industrial Select Sector SPDR ETF (XLI), which tracks the performance of the industrial sector, fell 2.8% in April 2018. General Electric (GE), Boeing (BA), 3M (MMM), and Honeywell International (HON), major holdings of the XLI ETF, returned 4.3%, 1.7%, -11.4%, and 0.11%, respectively, in April.

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What impacted the industrial sector in April?

We have already seen that major industrial stocks such as Boeing (BA), 3M (MMM), and Caterpillar (CAT) fell drastically after President Trump announced import tariffs on Chinese products. With the expectation of a trade war between the US and China, major industrial stocks showed weakness.

However, 3M stock fell 7% on April 24 after the announcement of its 1Q18 results. The company posted EPS of $2.50, which beat Wall Street analysts’ estimates of $2.50. However, the company lowered its guidance for fiscal 2018, and this dragged down the stock price on the day of its earnings release.

In the next part of this series, we’ll analyze the performance of the volatility index.


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