3M Stock Price Turns Lower On Attacks From The White House

3M Stock Price Turns Lower On Attacks From The White House

  • Trump invoked the DPA for the second time to force 3M to produce face masks for the government
  • 3M warns that the order may backfire and create a situation in which the number of available gear is decreased
  • Shares of 3M trade 3.5% down on the day after gaining more than 3% yesterday

Shares of 3M (NYSE:MMM) have turned lower today after the U.S. President Trump announced he invoked the Defense Production Act (DPA) to force the manufacturing giant to produce face masks.

Fundamental analysis: Trump blasts 3M over face masks

U.S. President Donald Trump blasted the manufacturing giant 3M today as his administration is trying to force the company to produce more face masks for the U.S. market. In his usual fashion, Trump used Twitter to voice his anger at 3M.

Yesterday, Trump invoked the Defense Production Act to force manufacturers sell their products to the US government if requested. This is the second time since the COVID-19 outbreak that Trump invoked the DPA, after the first order he signed last week was directed against General Motors (NYSE:GM)

“To be frank, over the last several days we’ve had some issues, making sure that all of the production that 3M does around the world, enough of it is coming back here to the right places,” said Peter Navarro, the White House adviser on trade and manufacturing.

The United States is in need of critical infrastructure to fight the COVID-19 outbreak, including ventilators and respirators.

“I am grateful to these and other domestic manufacturers for ramping up their production of ventilators during this difficult time,” Trump said in a short statement released alongside the memo. “Today’s order will save lives by removing obstacles in the supply chain that threaten the rapid production of ventilators.”

Through the signed order, Trump authorized the Federal Emergency Management Agency (FEMA) to “acquire, from any appropriate subsidiary or affiliate of 3M Company, the number of N-95 respirators that the Administrator determines to be appropriate.”

White House has become increasingly agitated by 3M’s decision not to send millions of its N95 masks, produced in Singapore and intended for markets in Asia, to the US.

“The administration had worked very hard to ease some rules for 3M and other respirator manufacturers because those companies, 3M chief among them, had essentially promised that they would immediately be putting 35m N95s into the US marketplace. It became clear recently that wasn’t happening,” the White House official told the FT.

On the other hand, 3M hit back at Trump by saying that a request to stop exporting N95 masks could backfire and actually make the equipment less available in the United States.

“In addition, ceasing all export of respirators produced in the United States would likely cause other countries to retaliate and do the same, as some have already done. If that were to occur, the net number of respirators being made available to the United States would actually decrease,” said the company in a statement.

Technical analysis: 3M stock turns negative

Shares of 3M opened around 1.5% lower today after gaining more than 3% yesterday. The 3M stock price currently trades 3.5% lower on the day, as it is threatening to return to recent multi-year lows.

3M stock monthly chart (TradingView)

Last week, the stock price touched the 200-MMA for the first time since 2009, which forced a rebound higher. However, the bulls have so far failed to build on this rebound and the price action looks like it wants to rotate lower again. Any close below the $120 mark would be a major bearish development.

Summary

Shares of 3M trade around 3.5% lower today after the U.S. President Trump invoked the DPA against the manufacturing giant, authorizing FEMA to acquire from 3M a number of N-95 respirators that the White House deems appropriate.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

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