Ford and GM fear UAW strike, Walmart, Chinese ADRs: Top stocks

Ford (F) and General Motors (GM) are both under pressure amid labor contract negotiations with the United Auto Workers (UAW). Walmart (WMT) stock rises, locking in a fourth record close this month, as the company is set to report earnings next week. Chinese ADRs slide over concerns about China's real estate sector. Yahoo Finance's Seana Smith and Akiko Fujita discuss the top stocks to watch.

Video Transcript

SEANA SMITH: All right. Well, let's take a look at some of the individual movers of the day. And first up, we got to start with GM and Ford, both under pressure amid labor contract negotiations with the United Auto Workers. As the September expiration date for the contracts approaches, fears of a strike are beginning to creep in. We saw that reflected not only today but really the weekly moves that we saw in both stocks here, Akiko.

And I think the thought process is, at least the thinking along the lines of some of the analysts out there is that the workers, the unions might have the upper hand in this type of environment. Wells Fargo is out with a note saying that the expiring UAW contract on September 14 is the most imminent risk to GM and Ford, calling the demands audacious and really raising that risk of a strike.

AKIKO FUJITA: Yeah. I mean, there's two-fold, right, Seana? On the one hand, there's the risk of a strike and how much that would cost to the carmakers if there is a work stoppage. There's also the realization that if they do reach some kind of contract, that's going to mean higher expenses. For these companies, you had that number out from Bloomberg this week saying that it would add more than $80 billion in expenses for each one of these American car companies.

When you consider what exactly the UAW is asking for right now in their contracts, and you don't need to look further than UPS to understand where those higher costs are going to come from. They averted a strike, and yet they had expenses go up significantly as a result of the higher wages, more benefits, all of that.

So it feels like when you look at these carmakers, there's a bit of a lose-lose situation. But certainly, investors are not looking for a strike here, but either way, looking at higher costs as a result of these negotiations. Shares of Walmart closing higher, locking in a fourth record close this month. The company also gearing up to report its quarterly results next week.

Seana, we were talking to UBS' Michael Lasser earlier about the strength that Walmart has when you compare it to some of its competitors. There's a lot of expectation riding on these results in part because of Walmart's mix and where consumers are right now. You talked about Target not being a little more discretionary. Walmart in a stronger position when it comes to fresh foods, sort of these key items that consumers are going for right now, increasingly seeking out value. You could argue Walmart is in a stronger position in that space and certainly, higher expectations here going into next week's results.

SEANA SMITH: Yeah. There certainly are higher expectations, especially on the heels of what we heard last quarter from these two companies, like you were just saying there, Akiko. Target, obviously, when you compare it to the position of Walmart, Walmart in a stronger position than Target just given Target's heavier reliance on some of those more discretionary items.

But when it comes to Walmart and what we are expecting, Credit Suisse maintaining their outperform rating on the stock, also raising their price target to $180 this year. They are very confident just in terms of Walmart's positioning right now, what those returns will potentially look like.

It was interesting though to me what we heard from Michael Lasser just about the outlook. He expects a cautious outlook here from Walmart. Despite the fact that he thinks they are going to be able to weather some of the downturn, some of the cautious consumer, at least in the coming months, he would not be surprised if we do get a cautious guidance here from Walmart given some of those macro pressures.

All right. Also Chinese ADRs sliding today as concerns over China's real estate sector is coming to the forefront yet again. Country Garden issuing a profit warning, deepening fears over China's property sector, this coming two years after we had the Evergrande group's default. When you take a look at the losses across the board, Akiko, I know you're following this very closely, but really just highlights the troubling economy that China faces right now. The fact that we haven't seen this recovery pick up steam, like we initially anticipated. And obviously, some of that has to do with the massive weakness that we're seeing within the property sector.

AKIKO FUJITA: Yeah I mean, when you think about Country Garden the reason we're so focused on that is because that's the last of the big developers that have been able to avoid a default up until now. And when you think about this incredible growth that we have seen from China over the years, not over the last few years but over the years, it has been on the back of real estate. These developers taking on massive loads of debt to expand in a big way.

And what we saw with Country Garden reporting saying they expected a loss of $7.6 billion over the first six months of the year, a lot of investors thinking back to what happened with Evergrande, and that has really brought back in the jitters there. You see Alibaba, JD.com, Baidu, all the big Chinese AVRs, they're pulling back in a big way. And by the way, Country Garden traded over in Hong Kong, seeing massive losses on the day on the back of these numbers.