Expert Investor
Author: Mauricio Carrillo
Senior Reporter
Mauricio Carrillo

3M Under Pressure as Trump Invokes Defense Production Act

Minnesota Mining and Manufacturing Company 3M is trading under pressure on Friday as investors are watching closely the implications of the Defense Production Act invoked by United States President Donald Trump and his complaints about 3M exportations to foreign Countries.

Shares of 3M are trading sharply negative on Friday, but this time it is not because of the market environment or company financials, but Trump's bad press on the Minnesota based conglomerate and the way 3M is facing the Coronavirus COVID-19 global crisis.

On April 2, Trump released a note where the White House authorized the head of FEMA to "acquire" as many as N-95 respirators that the administration "determines to be appropriate" from 3M or any subsidiary or affiliate.

America First Enhanced

The order came after a Fox News piece reported that Jared Moskowitz, head of Florida's Division of Emergency Management, complained that 3M was selling masks to foreign countries instead of delivering the stocks in the United States.

Moskowitz said:

This is about the executives who decided not to put America first, and it is going to have devastating consequences. The idea that an American company is selling masks away from our hospitals, doctors, the real heroes on the front lines is really criminal.

President Trump reacted furiously to the information and decided to enhance the Production Act against 3M, and then he blamed the company on social media.

We hit 3M hard today after seeing what they were doing with their Masks. "P Act" all the way. Big surprise to many in government as to what they were doing - will have a big price to pay!

3M Says They Are a Critical Supplier in Canada And Latin America

After the decision taken by President Trump and with the company's equities falling hard, 3M released a statement highlighting the efforts they have been doing in the last three weeks to fulfill all United States necessities on health care.

The company acknowledged that the Defense Production Act was released to require 3M to prioritize orders of N95 respirators from the Federal Emergency Management Agency. They look forward to working with FEMA to implement yesterday's order.

3M also highlighted its efforts made globally to bring masks to the United States. According to the press release, 3M secured approval from China's administration to export US 10 million N95 respirators manufactured by 3m in China.

Regarding the complaint about 3M sending masks to foreign countries, the company pointed out the critical role that 3M plays as a supplier in Canada and Latin America.

The note said:

There are, however, significant humanitarian implications of ceasing respirator supplies to healthcare workers in Canada and Latin America, where we are a critical supplier of respirators, 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.

3M states that if the United States and other countries do the same, the respirators being made available to the United States would actually decrease.

3M Shares Analysis And Chart

3M Daily Chart

Shares of 3M are trading down on Friday and despite it recovered some of its losses, it is still moving under pressure.

3M Co is currently trading at 136.16, 1.27% negative on the day. Previously, the share was testing the 1.40 resistance, a level that has contained the unit the third week of March. Actually, the stock has been moving in a range between $132.00 and 140.00 in the last week after recovering from minimums since September 2013 reached March 23.

Most rating agencies have a dovish perception of MMM with CFRA and TheStreet Analysts having it as a "hold." At the same time, Market Edge identified the share as an "avoid" at current circumstances.

Technically, current conditions for MMM are weak, with underlying indicators being negative and a reversal in the current middle term in the cards. MACD-LT confirms that the middle-term trend is bearish, and the chart formation indicates the stock is in a strong downward trend. Besides, MMM is below its falling 200-day moving average.

As for the downside, MMM is facing support at 132.00. Below, 128.00 will be the level to watch.

Meet The Author
Mauricio Carrillo
Mauricio Carrillo
Senior Reporter

Mauricio is a newer member of the team and a very welcome addition. He is a financial journalist and trader with over ten years of experience in stocks, Forex, commodities, and cryptocurrencies. This experience means he has an excellent understanding of the markets and current events.

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