Caterpillar, 3M, and Dow Are Leading the Dow Higher. Here’s Why.

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Cyclical stocks were roaring on Friday after skittish investors got some good news about the industrial economy and about trade.

Dow (ticker: DOW) was leading the Dow Jones Industrial Average higher, rising 5.6% near midday. Caterpillar (CAT) was up 5.4% and 3M (MMM) was up 3.5%.

Overall, the Dow was up 1.6%, swinging the week-to-date gain to 1.3%. If the advance holds, the Dow Industrials would snap a 3-week losing streak.

All three stocks leading the Dow have been beaten up year to date for a host of reasons. 3M investors, for instance, are trying to understand the size of new PFAS-environmental liabilities. 3M shares are off 17% year to date. Dow share have dropped almost 5% since it began trading again as a stand-alone company—separated from DuPont de Nemours (DD). Cat stock has done a little better than the other two, rising almost 2% year to date, but badly trailing the overall market.

Most of the pain being felt by investors in all three stocks, however, is tied to two issues: slowing manufacturing growth and China.

Caterpillar and 3M, in particular, have been roiled by Chinese economic weakness tied to trade. Caterpillar generates about 5% to 10% of total company sales there, as China is a dominant producer of many commodities that are mined using Cat equipment. 3M generates more than 30% of sales in the Asia-Pacific region, of which a big portion come from China.

A key U.S. manufacturing gauge showed that the industrial sector of the economy contracted for the second straight month in September. But on Friday, earnings for industrial distributor Fastenal (FAST) beat Wall Street expectations, allaying some of those fears. That is good new for the trio of Friday winners. FAST isn’t in the Dow Industrials, but its share were up 17% Friday.

It can be hard to pin down why the market, or any stock, moves on any give day. On Friday, trade and manufacturing—which have dominated news lately—made the task of assigning blame, or congratulations, a little easier.

Write to Al Root at allen.root@dowjones.com