Stocks meandered for much of Friday despite some encouraging consumer data, which may not be surprising given that this week was mostly impressive for riskier assets.
In a report out earlier today, the University of Michigan’s initial reading of September consumer sentiment jumped to 92 from the three-year low of 89.8 last month. Additionally, another report out this morning showed retail sales in August rose 0.4% and that the July reading was revised higher.
“The resilient reading shows American consumers may be poised to shake off trade war and global slowdown to support the record-long economic expansion as the labor market holds up,” according to Bloomberg.
In recent months, I’ve noted many times in this space the importance of the U.S. consumer and that many of the recession calls were likely premature because the market has not absorbed material deterioration in consumer data to date. I’ll stick by that thesis because the preliminary September sentiment reading seems to indicate the August result was a bump in the road, not the start of a negative trend.
Today, the Nasda Composite finished lower by 0.22% while the S&P 500 dropped 0.08%. The Dow Jones Industrial Average was up 0.13%, extending its winning streak to eight days. In late trading, 16 of the Dow’s 30 components were pointed higher.
Pleasant Surprise for Dow Component UNH
It was interesting if not surprising to see UnitedHealth (NYSE:UNH), a frequent guest of this space, rank as one of the best-performing names in the Dow today. I say surprising because there was a democratic debate last night, an event that typically weighs on stocks like UNH. I missed the goings on, but I’ll assume whatever Medicare For All talk that took place was not strident enough to derail UNH shares today.
Staying with the healthcare theme, don’t read too much into today’s bounce in pharmacy name Walgreens Boots Alliance (NASDAQ:WBA), a consumer staples name with sizable drug price exposure, because two of the Dow’s three pharmaceuticals names finished lower today. This is another hot-button issue investors need to be aware of going forward.
“An ambitious draft plan from House Speaker Nancy Pelosi (D-Calif.) to allow government price negotiation on a swath of expensive drugs has shifted Washington’s contentious policy debate leftward at a critical point for Democratic negotiations with Senate Republicans and the White House,” reports Modern Healthcare.
BA Flying Higher
Boeing (NYSE:BA) continued trending higher, gaining 1.06% today as the company makes progress toward getting the 737 MAX jet airborne again. A deeper analysis of that issue and other important points on Boeing stock is available here.
There seems to be some momentum for Boeing getting the jet back in the skies before the end of this year, Wall Street’s desired time horizon, but by the company’s admission, it doesn’t control the timeline.
“The timeline is in the hands of divided regulators around the world who must approve Boeing’s proposed software fix for 737 MAX flight controls and new training materials. European regulators plan their own test flights on the changes,” reports Reuters.
Fighting Back
With a decline of about 2%, Apple (NASDAQ:AAPL) was the worst-performing stock in the Dow Jones Industrial Average. That’s not something that happens very often, so when it does, it’s fair to surmise there’s a reason for the Apple weakness, albeit temporary.
Goldman Sachs analyst Rod Hall cut his price target on Apple shares today to $165 from $187, saying the company’s recently unveiled $4.99 per month price on the Apple + streaming TV service is aggressive and could hamper the company’s earnings.
Apple rebutted the analyst, saying it doesn’t expect Apple + to materially impact results.
Bottom Line on Dow Jones
There are just a couple of weeks left in the the third quarter, meaning another earnings season is fast-approaching. I’ll leave you with a glance at some of the sectors analysts are bullish and tepid on this quarter.
“At the sector level, analysts are most optimistic on the Energy (66%) sector, as this sector has the highest percentage of Buy ratings. It is interesting to note that the Energy sector is projected to report the largest earnings decline of all 11 sectors in CY 2019 (-20.9%) and the largest earnings growth of all 11 sectors in CY 2020 (30.2%),” said FactSet.
The research firm notes analysts are not enthusiastic about consumer staples as that sector has the lowest percentage of “buy” ratings and the highest percentage of “sell” calls.
Todd Shriber does not own any of the aforementioned securities.
