U.S. equities are sliding lower again on Wednesday as nervousness rises about the policy implications of president-elect Donald Trump’s “too strong” comments about the dollar over the weekend. As a result, the Dow Jones Industrial Average is being pulled further away from the 20,000 threshold, and stocks including Citigroup Inc (NYSE:C), UnitedHealth Group Inc (NYSE:UNH) and General Electric Company (NYSE:GE) are at risk.
This puts the post-election melt-up at risk, too, with the Dow threatening to fall out of a tight six-week consolidation range between 20,000 and 19,800. A breakdown here would likely be dramatic amid evidence of narrowing market breadth, extreme sentiment, and extended valuations.
A number of key blue-chip stocks are being caught in the selling pressure, tipping into fresh downtrends. Here’s why you should have GE, UNH and C on watch right now:
Citigroup reported mixed results on Wednesday morning, with revenues missing expectations and falling 8% from last year.
C shares as a result have fallen below their 50-day moving average in a major way for the first time since September. This is a major reversal of trend. Financial stocks like Citigroup led the way higher after Election Day thanks to an upward lift in long-term interest rates (on higher inflation expectations and economic growth hopes) and expectations of lowered regulatory burdens under Trump administration.
Since then, however, there has been a reversal of fortune in the bond market (safe-haven demand for Treasuries) that has weighed on net interest margins and thus, hopes for higher bank profitability.
UnitedHealth Group (UNH)
UNH has been slammed below its 50-day moving average for the first time since before the election amid a post-earnings slump. The company reported better than expected earnings of $2.11 per share, but issued soft forward guidance.
Healthcare insurers also are under some pressure as details of a possible Obamacare repeal-and-replace effort by Trump and congressional Republicans takes shape.
UnitedHealth will next report results on April 18 before the bell. Analysts are looking for earnings of $2.17 per share on revenues of $48.3 billion.
General Electric Company (GE)
GE shares have been in a persistent downtrend since the middle of December. Now, they’re at risk of falling below both their 50-day moving average and their lower Bollinger Band — a breakdown of a type not suffered by shareholders since September. The reversal comes after the stock failed to challenge its July high, despite the fact industrials like General Electric were among the strongest sector groups during the post-election rally.
General Electric will next report results on Jan. 20 before the bell. Analysts are looking for earnings of 46 cents per share on revenues of $33.4 billion.
I have recommended the February $31 GE puts to Edge Pro subscribers.