By CCN Markets: If you're wondering what's behind the rally in the Dow Jones and S&P 500 indexes, you can thank Santa Claus. President Trump in a sudden move decided to delay the latest round of China tariffs, which were originally planned for September. The reason? Trump reportedly said he's "doing this for the Christmas season...to help people," declaring the tariffs could have had an "impact on people" and deciding to instead delay them. Usually, the Santa Claus rally in the stock market happens in late December/early January, but this year Old Saint Nick appears to have visited investors and consumers for that matter a little early.
It's not that anything has changed on the economic front, with fears of a recession still looming. But Trump just gave stocks another tailwind, if temporary, that combined with an accommodating Fed and share-buyback happy corporate America is fueling the rally in the S&P 500 and the Dow Jones. For more, here are three of the top performers in the Dow Jones index.
USTR Says Sept 1st most of $300 Billion of Chinese imports will be under 10% tariff. A large list that includes cell phones, laptops, and some clothes will be delayed until Dec 15th. Chinese Commerce Ministry tells us they agreed to nothing in return for delay #China #Trade
— Edward Lawrence (@EdwardLawrence) August 13, 2019
1.) Dow Jones Darling Apple
Consumer electronics are the big winners from the delayed tariffs, as evidenced by iPhone maker Apple leading the gains in the Dow Jones. Electronics including smartphones are at the top of the list of the items that are getting relief from the tariffs for months. It's the second gift that Apple received from the tariff fairy, as its smartwatches and earbuds were previously already left out of the China tariffs. Meanwhile, Apple is doing its part to lift its own stock, as evidenced by a massive share buyback program in place. The company bought back $49 billion in stock so far in the current fiscal year, Barron's reports. Share buybacks like dividends are a way for companies to incentivize investors. Apple was up as much as 5 percent and is currently trading higher by 3 percent.
Industrial stocks were another sector to get hit hard by the latest wave of tariffs, so it makes sense that Dow Jones stocks such as Caterpillar are rising in the stock market's relief rally. Caterpillar is up nearly 3 percent today after shedding 13 percent since early May. Earlier this month, Goldman Sachs reportedly slashed its rating on CAT stock amid worries that an economic slowdown will hurt machine production and consequently Caterpillar's earnings. For now, the stock is seeing a bit of a reprieve on the tariff-fueled rally but until the threat of recession lifts, it doesn't appear to be entirely out of the woods yet.
3.) Chip Maker Intel
Chipmaker Intel was also caught in the middle of the U.S./China trade war, and the stock is getting some relief today as the third-best performer in the Dow Jones index. The company has reportedly been examining its global supply chain that is entrenched in the tariffs. Intel CEO Robert Swan recently told Bloomberg:
"How do we move goods – sometimes our customers will move their operations – and how do we work the global supply chain so less product is coming directly from China to the U.S. that would be subject to tariffs."
Intel, similar to Apple and Caterpillar, are all benefiting from the relief rally but President Trump and President Jinping have yet to sign a trade deal. Until then, the grinch could interrupt this early Santa Claus rally at any time.