With first-quarter earnings season kicking off in force Tuesday, the major equity benchmarks rallied anew even as the reports from Dow components were mixed, indicating market participants are focusing more intently on signs that the novel coronavirus is starting to ease.
- The S&P 500 gained 3.06%
- The Dow Jones Industrial Average added 2.39%
- The Nasdaq Composite surged 3.95%
- While earnings and the coronavirus dominated the headlines today, Apple (NASDAQ:AAPL) was the best-performing Dow stock on confirmation that the company shipped 2.5 million iPhones in China last month, a surprisingly strong number in the eyes of some analysts.
On the more dour side of the ledger, JPMorgan Chase (NYSE:JPM) was a Dow offender after saying its first-quarter profit slumped nearly 70%. At issue is the bank’s massive loan loss provision. The largest U.S. bank said it’s setting aside $8.29 billion for bad loans. Wall Street was expecting half that sum, and that’s a clear sign the bank is bracing for further economic erosion at the hands of COVID-19.
That’s a point to ponder with fellow Dow financial stock Goldman Sachs (NYSE:GS) and a slew of other big names from the sector reporting quarterly results this week. Goldman reports on Wednesday.
Proving that bad bank earnings were likely baked into the market weeks ago, 25 of 30 Dow stocks were higher in late trading.
Not All Bad on the Earnings Front
While there was much ado about JPMorgan’s results, investors shouldn’t overlook Johnson & Johnson (NYSE:JNJ), which was the second-best performer in the Dow today behind Apple.
The healthcare company earned $2.30 a share in the first three months of this year, easily topping the consensus estimate of $2. Shares of JNJ rallied despite a massive haircut to the company’s 2020 forecast. JNJ now expects to $7.50 and $7.90 per share this year, well below the prior forecast of $8.95 and $9.10 per share.
The company’s consumer products division contributed $3.6 billion of $20.7 billion in total first-quarter sales as shoppers stocked up on medicines and supplies in the face of the coronavirus pandemic.
Reacting to Bad News
Among Dow components, Boeing (NYSE:BA) probably holds the crown for delivery of bad news and the aerospace giant is back at it again Tuesday, ranking as the worst-performing Dow stock. The company said it delivered 50 planes in the first quarter, just a third of the company’s year-earlier tally.
The company will report what will assuredly be bleak first-quarter results on April 29 with Wall Street expecting a loss of 1.07 a share on $17.3 billion in sales.
UnitedHealth (NYSE:UNH) was a decent Dow performer ahead of its first-quarter earnings report Wednesday before the bell. The managed care is expected to post earnings of $3.32 per share on revenue of $58.7 billion.
“UNH is the largest managed care company and the first to report each quarter; this is a bellwether earnings report – particularly at this stage of the COVID-19 pandemic,” said JPMorgan analyst Gary Taylor in a recent client note.
Companies like UnitedHealth are absorbing big COVID-19 tabs due to cost-sharing agreements being waived, and JPM’s commentary on this issue will go a long way toward charting the stock’s near-term performance.
Bottom Line on the Dow Jones Today
While earnings and coronavirus data will take center stage this week, markets aren’t clear of what could be a seriously rough economic patch, at least for the next several months.
Goldman Sachs sees second-quarter GDP falling 11% on a sequential basis and a staggering 35% year-over-year. The bank also forecasts unemployment rising to 15%, an estimate it acknowledges is conservative.
“The initial improvement [in outlook] was mostly policy-driven, but the greater optimism of the past week seems to be at least partly related to the virus itself,” said Jan Hatzius, Goldman’s chief economist.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.