Dow's Top Q3 Performers Show Consumers Are On Spending Spree
Zacks Investment Research | Sep 30, 2019 10:29PM ET
The third quarter came to a finish yesterday. It’s been a topsy-turvy ride for equities in the quarter with the Fed trimming rates twice, the yield curve getting inverted for the first time in almost a decade and the Sino-American trade war continuing to weigh on investors’ sentiments.
In its last move, the Fed cut target interest rate by 25 bps to a range of 1.75-2%, a widely expected move to sustain the decade-long economic expansion amid trade concerns. Decline in business investments as well as exports coupled with persistently low level of inflation were cited as the primary reasons for the rate cuts.
Talking about yield curve inversion, the benchmark 10-year Treasury yield was at its lowest level against the 2-year Treasury note in August since 2007. The yield on the benchmark 10-year Treasury note was at 1.476%, 5 basis points lower than the 2-year note’s rate of 1.526%.
With the 10-year rate below the 2-year note, fixed income traders were expecting a slowdown in the near term. Lest we forget, the 2-year yield had always surpassed the 10-year note in every slowdown over the past 50 years.
So, what led to the inverted yield curve? Thanks to the ever-changing China trade narrative, the stock market continued to gyrate, compelling investors to pull money out of equities and opt for safe-haven government bonds, eventually leading to a decline in the 10-year Treasury yield. After all, bond yields tend to move opposite to prices.
Nonetheless, when the dust settled however, the broader Dow eked out a gain of within 2% in the third quarter. In fact, a better look at the top performers from the blue-chip index showed that recession is not imminent and consumers will continue to bolster the economy.
The top-performing stocks for the third quarter in the Dow were Procter & Gamble (NYSE:PG) , Apple (NASDAQ:AAPL) , Nike (NYSE:NKE) and Home Depot (NYSE:HD) . In fact, Walmart (NYSE:WMT) was the blue-chip’s sixth-best performing stock, rising 7.4% compared with a 7.7% jump in Intel (NASDAQ:INTC) shares. You can see Zacks Investment Research
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