Broadly speaking, Thursday’s market action was pretty good considering the potential headline risk coming from tomorrow’s G-20 summit. At this point, reports on progress between a trade deal between the U.S. and China appear mixed, but the the murkiness could be cleared up by the weekend.
Concerning fact: The U.S. had a trade deficit of about $420 billion with China last year. If President Trump can prove to market participants that number is poised to fall and that the decline does not mean a strained relationship with China, it is likely riskier assets rally.
Today, the Nasdaq Composite added 0.73% while the S&P 500 jumped 0.38%. The Dow Jones Industrial Average fell by just 0.045%.
The Dow was aided by a decent earnings report before the bell from Walgreen Boots Alliance (NASDAQ:WBA). Shares of the pharmacy benefits company surged 4.31% after the company said it had adjusted earnings of $1.47 per share on sales of $34.59 billion. Wall Street expected earnings per share (EPS) of $1.43 on sales of $34.46 billion.
“Investors have been concerned after the company in April slashed its adjusted earnings growth forecast for the year from a range of 7% to 12% to roughly flat, in the face of stubbornly weak generic drug prices and low reimbursement for filling prescriptions,” according to Reuters.
WBA shares were the best percentage gainers in the Dow today.
In late trading, around two-thirds of the Dow’s 30 components were in the green, including three of the four healthcare stocks that reside in the blue-chip index. The leader of that group and the second-best Dow performer today on a percentage basis was UnitedHealth (NYSE:UNH), which gained 1.37%.
We’ve been discussing the UnitedHealth and rival healthcare service providers quite a bit here this year, due in large part to politics. Following the first night of the Democrat presidential debates Wednesday night, UnitedHealth and rival companies in this space escaped without any scratches today.
That is was because Medicare-For-All chatter did not dominate the debate last night. However, due in part to the fact that seemingly everyone and her sister is running for president, there is another round of debates tonight and it is possible Medicare For All talk is renewed. Let’s see what happens with UNH and friends on Friday.
In a report out today, CNBC said UNH is the Dow stock most beloved by Wall Street analysts. Merck (NYSE: MRK), another healthcare name, is tied with Microsoft (NASDAQ:MSFT) and Visa (NYSE:V) for second in terms of sell-side analyst adulation.
Boeing Co. (NYSE:BA), the Dow’s largest component, slipped 2.59% today it was revealed in a regulatory filing that the Federal Aviation Administration (FAA) found another issue with the 737 MAX passenger jet that must be resolved before those planes can fly again.
3M Co. (NYSE:MMM), another industrial name, traded modestly lower after the aforementioned CNBC revealed that the industrial conglomerate is the least liked Dow stock in the analyst community with a meager four “buy” ratings.
Bottom Line: It’s About Earnings
With earnings reports trickling in and the G-20 summit likely to be put in the rearview mirror next week, market participants will likely focus on earnings and related commentary through much of July. That may not be a good thing.
“Earnings estimates are essentially ‘flattish’ for 2019 compared with 2018. This puts stock investors in a difficult position because it’s hard to justify equities at a record high when there is very little earnings growth expected,” according to CNBC.
Technology, the S&P 500’s largest sector weight, is one of the offenders on the earnings front because the sector’s second- and third-quarter profit growth is forecast to decline.
Todd Shriber does not own any of the aforementioned securities.