After several years of what were often hostile or unproductive negotiations, the U.S. and China finally inked the first part of what the world’s two largest economies are hoping will be a broader trade package. That and some earnings reports from marquee companies paved the way for modest upside for equities Wednesday.
- The S&P 500 added 0.19%
- The Dow Jones Industrial Average gained 0.31%
- The Nasdaq Composite rose by 0.08%
- On the back of a strong earnings report, managed care provider UnitedHealth Group (NYSE:UNH) led the Dow Jones today with a gain of 2.8%
While some of the bloom of the trade deal rose wore off pretty quickly during the trading day, it cannot be argued that China is pledging to buy $200 billion worth of American goods to close the trade gap between the two countries and crack on technology intellectual property theft.
As a voracious consumer of commodities, China will purchase $52.4 billion worth of American energy products, including coal, natural gas and oil, over the next several years as part of the trade accord.
Even with that news, Exxon (NYSE:XOM) and Chevron (NYSE:CVX) were not among the Dow winners today, but losses for the oil giants were minor.
In late trading, about half of the Dow’s 30 stocks were pointed higher.
Onward And Upward For UnitedHealth
As noted above, UnitedHealth, the largest healthcare component in the Dow, was the index’s leader today. UNH reported 2019 earnings of $15.11 per share, beating the recently upped guidance of $15 and easily topping its 2018 profit. UNH reiterated a 2020 forecast of between $16.25 and $16.55 per share.
“Return on equity of 25.7 percent in 2019 reflected the Company’s strong overall operating performance and efficient capital structure. The debt to total capital ratio was 40.2 percent at December 31, 2019, full year dividend payments grew 18.4 percent year-over-year to $3.9 billion, and the Company repurchased 22.4 million shares for $5.5 billion in 2019,” according to a statement issued by UNH.
The company’s Optum health services unit grew revenue by $11.7 billion or 11.5% year-over-year to $113.0 billion.
Muted Reaction
Goldman Sachs (NYSE:GS) also stepped into the earnings confessional earlier today. Investors reaction to this report was much more subdued than what was seen yesterday with fellow Dow component JPMorgan (NYSE:JPM).
Goldman stock inched up on the day, but its fourth-quarter net income dropped to $1.72 billion, or $4.69 a share, from $2.32 billion, or $6.04 a share a year earlier. Revenue jumped 23% to $9.96 billion, indicating that the problem, by Goldman’s own admission, was rising expenses, something the company said it’s addressing.
Everywhere You Want to Be
Visa (NYSE:V) continued an impressive ascent that has seen the stock climb about 4% over the past week. Investors are rewarding the stock for the company’s recent acquisition of fintech startup Plaid, a deal announced earlier this week.
For conservative investors looking for fintech exposure, Visa and rival Mastercard (NYSE:MA) have shown themselves to be more than worthy options in a space where stock picking among smaller companies can be difficult for the uninitiated. After UnitedHealth, Visa was the Dow’s second-best performer today.
Just Another Day For Apple
Albeit in modest fashion, Apple (NASDAQ:AAPL) was again among the Dow winners on Wednesday after another analyst chimed with bullish commentary on the iPhone maker. Canaccord Genuity analyst T. Michael Walkley reiterated a “buy” rating on Apple while lifting his price target on the high-flying stock to $355 from $275.
Walkley is enthusiastic about iPhone demand as well as consumers’ desire for the Apple Watch and AirPods.
“He is particularly bullish on the company’s opportunities to leverage its huge installed base of devices–1.4 billion worldwide–to grow its increasingly varied services business,” according to Barron’s.
Bottom Line on the Dow Jones Today
We’re still in the early innings of earning season and have some more big financial services reports to work through before getting to technology, the S&P 500’s largest sector weight, but there’s an important earnings theme emerging in that group investors should take note of.
“At the sector level, the Information Technology sector has the highest number of companies issuing EPS guidance for the quarter at 39,” according to FactSet research. “This is not unusual, as the Information Technology typically has the highest number of companies issuing EPS guidance each quarter. Of these 39 companies, 19 have issued negative EPS guidance and 20 have issued positive EPS guidance.”
As of this writing, Todd Shriber did not own any of the aforementioned securities.
