The index traversed an eventful, yet holiday-shortened week. After remaining closed on Monday, markets declined at the start of the week, following concerns about a global economic slowdown. Strong corporate earnings from key components boosted the index on Wednesday.

However, uncertainty over ongoing U.S.-China trade talks led the index to decline on Thursday. Meanwhile, investors continued to anxiously watch the developments in Washington as the government shutdown entered its 34^th day.

Last Week’s Performance

The index gained 1.4% last Friday following positive news on the trade war front. On Jan 18, Bloomberg reported that China has offered to ramp up imports from the United State in the next six years.

On Jan 16, The Wall Street Journal reported that the U.S. government is contemplating a proposal regarding lifting of some tariffs imposed on China. These developments helped investors ignore concerns about the month-long partial shutdown of the U.S. government.

The index gained nearly 3% last week. Indexes recorded their first weekly gain for four straight weeks since August 2018. Strong economic data, the Fed’s hint of a softer monetary stance in 2019 and several positive developments on the trade war front acted as catalysts to the week’s gains.

The Dow This Week

Markets remained closed on Monday due to Martin Luther King Jr. Day. The index declined 1.2% on Tuesday, reversing a four-day winning run, owing to market concerns about a global economic slowdown. On Jan 21, The International Monetary Fund (IMF) reduced its global economic growth forecast for 2019 and 2020.

Conflicting news on the trade war front also dented investors’ confidence. Per a CNBC report, the U.S. government has rejected a trade planning meeting with China scheduled to be held this week on the ground of disagreements over intellectual property rights.

The index gained 0.7% on Wednesday, buoyed by strong fourth-quarter earnings results of several major companies. Shares of International Business Machines Corp (IBM Quick QuoteIBM - Free Report) were up 8.5%, marking its best session since Oct 18, 2017, on the back of strong fourth-quarter 2018 results.

Shares of The Procter & Gamble Co. (PG Quick QuotePG - Free Report) soared 4.9% after the company reported robust second-quarter fiscal 2019 results. Shares of United Technologies Corp. surged 5.4% after posting strong fourth-quarter 2018 results.

The index lost 0.1% on Thursday following continuing uncertainty over trade talks between the United States and China. According to U.S. Commerce Secretary Wilbur Ross, the two countries need to resolve “lots and lots of issues.”

Consequently, the United States is “miles and miles” away from striking a deal with China. Meanwhile, investors watched developments in Washington warily as the government shutdown extended into its 34^th day. Meanwhile, weekly jobless claims fell to their lowest level in 49 years.

Components Moving the Index

United Technologies posted fourth-quarter 2018 earnings of 1.95 per share, surpassing the Zacks Consensus Estimate of $1.51. The bottom line also came in higher than the year-ago figure of $1.60 per share. The company reported adjusted earnings of $7.61 for 2018, an increase of 14.4% from the prior year.

Revenues in the reported quarter came in at $18,044 million, up 15.1% year over year. The top line also outpaced the Zacks Consensus Estimate of $16,789 million.

Zacks Rank #3 (Hold) United Technologies has given a bullish full-year 2019 earnings guidance. Adjusted earnings are currently anticipated within the $7.70-$8.00 per share range. Additionally, the company has given revenue guidance for 2019 between $75.5 billion and $77 billion (estimating organic growth of 3-5% year over year). (Read: United Technologies' Q4 Earnings and Revenues Beat)

The Travelers Companies, Inc.’s (TRV Quick QuoteTRV - Free Report) fourth-quarter 2018 core income of $2.13 per share beat the Zacks Consensus Estimate of $1.98 by 7.6%. However, the bottom line deteriorated 6.6% year over year.

Zacks Rank #4 (Sell) Travelers’ total revenues rose nearly 4.6% from the year-ago quarter’s figure to $7.8 billion. The top-line figure also outpaced the Zacks Consensus Estimate of $7.7 billion.

For 2018, Travelers reported core income per share of $8.94, missing the Zacks Consensus Estimate by 1.1% but improving 22.8% year over year. Total revenues of $30.3 billion topped the consensus mark by 1.2% and grew 4.8% year over year. (Read: Travelers' Q4 Earnings & Revenues Surpass Estimates)

Procter & Gamble’s core earnings for the fiscal second quarter were $1.25 per share, up 5% year over year. The company’s earnings beat the Zacks Consensus Estimate of $1.21.

P&G reported net sales of $17,438 million, which surpassed the Zacks Consensus Estimate of $17,192 million. However, the top line remained nearly flat year over year and was hurt by currency fluctuations to the tune of about 4%.

Following a strong quarter, the company raised the upper end of the fiscal 2019 organic sales guidance by 1%. Consequently, organic sales for the fiscal year are now estimated to increase 2-4%.

The company now expects all-in sales to be down 1% to up 1% in fiscal 2019. However, the company continues to anticipate core EPS growth of 3-8% in fiscal 2019 compared with fiscal 2018 core earnings of $4.22 per share. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Johnson & Johnson’s (JNJ Quick QuoteJNJ - Free Report) fourth-quarter 2018 earnings came in at $1.97 per share, which beat the Zacks Consensus Estimate of $1.95 and increased 13.2% from the year-ago period driven by higher revenues and better operating margins.

Sales came in at $20.39 billion, beating the Zacks Consensus Estimate of $20.1 billion. Sales increased 1% from the year-ago quarter, reflecting an operational increase of 3.3% and an unfavorable currency impact of 2.3%.

Full-year 2018 sales rose 6.7% to $81.58 billion, beating the Zacks Consensus Estimate of $81.36 billion and coming ahead of the guided range of $81-$81.4 billion.

Adjusted earnings for 2018 were $8.18 per share, exceeding the Zacks Consensus Estimate of $8.16 and increasing 12.1% year over year. Earnings were at the higher end of the guided range of $8.13-$8.18 per share.

Zacks Rank #3 J&J expects 2019 adjusted earnings per share in the range of $8.50-$8.65. The guidance range reflects an operational growth rate between 5.7% and 7.6%. The Zacks Consensus Estimate for 2019 is $8.64.

Revenues are expected in the range of $80.4 billion to $81.2 billion, which falls short of the Zacks Consensus Estimate for revenues of $82.61 billion. (Read: J&J's Q4 Earnings Beat, 2019 Sales Forecast Soft)

IBM delivered fourth-quarter 2018 non-GAAP earnings of $4.87 per share, which beat the Zacks Consensus Estimate of $4.81. However, earnings per share decreased 5.9% from the year-ago quarter.

Revenues of $21.76 billion were almost in line with the Zacks Consensus Estimate of $21.74 billion and declined 3.5% on a year-over-year basis.

Zacks Rank #3 IBM reported fiscal 2018 non-GAAP earnings of $13.81 per share. Revenues came in at $79.6 billion, up 1% year over year. IBM expects non-GAAP EPS for 2019 to be at least $13.90. The Zacks Consensus Estimate is currently pegged at $13.86. (Read: IBM Q4 Earnings Surpass Estimates, Revenues Decline Y/Y)

Merck & Co Inc. (MRK Quick QuoteMRK - Free Report) announced that its partner, Samsung Bioepis Co., Ltd received FDA approval for Ontruzant, a biosimilar to Roche Holding AG's (RHHBY Quick QuoteRHHBY - Free Report) breast cancer treatment, Herceptin. Merck has a Zacks Rank #3.

Ontruzant is approved for the treatment of patients with HER2-overexpressing breast cancer, metastatic breast cancer and metastatic gastric cancer or gastroesophageal junction adenocarcinoma in patients who have not received prior treatment for metastatic disease.

Ontruzant is Samsung Bioepis’ first oncology biosimilar to receive FDA approval and will be marketed and distributed in the United States by Merck. Ontruzant was also approved by the European Commission (EC) in November 2017. (Read: Merck's Partner Gets FDA Nod for Herceptin Biosimilar)

Performance of the Top 10 Dow Companies

The table given below shows the price movement of the 10 largest components of the Dow, which is a price-weighted index, over the last five days and during the last six months. Over the past five trading days, the Dow has gained 0.1%.

Next Week’s Outlook

After enjoying a strong start to the year, market gains have been somewhat impeded this week. The government shutdown continues to pose a threat to investors in the near future. Meanwhile, U.S.-China trade negotiations have little to show in terms of concrete progress with the Trump administration, sending out mixed signals.

Clearly, investors will have to deal with these dual worries over an extended period. Fourth-quarter earnings have also proved to be something of a mixed bag. Under such circumstances, investors will look toward strong economic data for encouragement in the trading weeks ahead.

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