How the Dow, S&P 500 Could Navigate Today’s Trading


Dec. 12 2019, Updated 8:46 a.m. ET

Today at 7:06 AM ET, Dow Jones futures were almost unchanged. On Wednesday, the Dow (DIA) and S&P 500 rose just 0.1% and 0.3%, respectively. This month, the Dow has failed to reclaim its 28,000 level. Tariff concerns could drag on both indexes.

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Tariffs could drag on the Dow and S&P 500

If the US imposes its announced tariffs on Chinese goods, there could be mayhem on Wall Street. Today, President Donald Trump could meet with other White House officials to decide on the tariff deadline. On December 15, the tariffs announced in August are set to come into effect. If Trump decides not to postpone them, Phase 1 of the trade deal could see further delay.

Apple (AAPL) could react to the above development, as the proposed tariffs could increase its costs. Moreover, it’s one of the largest constituents of the S&P 500 and the Dow. Our story Apple Watch, HomePod, and AirPods Will Be Subject to Tariffs explains tariffs’ impact on the technology sector.

On December 12, the Shanghai Composite Index ended in the red. India’s Nifty 50 and Japan’s Nikkei 225 gained 0.5% and just 0.1%, respectively. In Europe, the FTSE 100, the CAC 40, and the DAX were in the green. The Dow and the S&P 500 could open in the green.

Energy and Dow

In December 12 trading, Saudi Arabia’s Saudi Aramco’s valuation surpassed $2 trillion, the highest valuation for any listed company. The surge in Saudi Aramco stock could be a positive development for US energy companies such as ExxonMobil (XOM) and Chevron (CVX). Check out Saudi Aramco Shares Rose 10% on First Trading Day for more info.

Oil prices were up around 0.5% as of 7:20 AM ET compared to Wednesday’s closing level. The bump could help energy stocks rise. Energy stocks constitute 4.5% and 4.2% of the Dow Jones Industrial Average and the S&P 500, respectively, as of December 12.

High-dividend-yield stocks

Yesterday, the Fed kept interest rates unchanged and signaled no more rate cuts in 2020. It’s very unlikely the Fed will raise rates in 2020. According to CME’s FedWatch Tool, next year, traders have no expectations of any hike in interest rates.

Amid a low-interest-rate environment, investors tend to prefer high-dividend-yield stocks. High-dividend-yield ETFs such as the Utilities Select Sector SPDR ETF (XLU) and the Real Estate Select Sector SPDR ETF (XLRE) would react if interest rates were lowered. Moreover, energy ETFs such as the Alerian MLP ETF (AMLP) would also be in focus.

Utilities and real estate sector stocks aren’t constituents of the Dow Jones, but they’re important to the S&P 500 Index. Utilities and real estate sector stocks constitute 3.3% and 3% of the S&P 500, respectively, as of December 12.

Read Five High-Dividend Stocks You Should Watch for more info.


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