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Dow 30 Stock Roundup: JPM & AXP Earnings Disappoint, GS & UNH Impress

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The index enjoyed another strong week of gains, increasing over three straight sessions. China’s government provided assurances that it would take necessary steps to boost its economy, allaying fears of a global slowdown.

Strong earnings from The Goldman Sachs Group, Inc. (GS - Free Report) boosted the index on Wednesday. Further, reports revealed that the Trump administration is considering reducing tariff on China, leading to fresh optimism among investors.

Last Week’s Performance

The index declined 0.02% on last Friday to end the session in negative territory. Shares of Caterpillar Inc. CAT dipped 0.7% after Goldman Sachs reduced earnings forecast for the company for the period between 2018 and 2020. This decline led the broader industrial sector lower. Another Dow component, 3M Company (MMM - Free Report) declined 0.7% and weighed on the index.

The index increased 2.4% last week. Such gains were made possible by progress in trade talks between the United States and China. The bull run for U.S. stocks continued for the fifth straight day on Thursday buoyed by Fed Chairman Jerome Powell’s statement that the central bank will be patient when considering rate hikes. Meanwhile, the partial government shutdown remained a concern.

The Dow This Week

The index declined 0.4% on Monday as corporate earnings kicked off. Losses were broad based and the result of weak Chinese trade data. Further, China’s trade surplus with the United States hit record levels.

Such events led to investors rotating out of stocks. Tech and utilities shares declined steeply and weighed on the broader markets. Shares of Apple Inc. (AAPL - Free Report) and Merck & Co., Inc. (MRK - Free Report) slid 1.5% and 2%, respectively, and weighed on the Dow.

The index increased 0.7% on Tuesday after news of Netflix, Inc.’s (NFLX - Free Report) price hike fueled gains for the broader markets. Meanwhile, China’s ministry of finance pledged to bring the country’s economy back on track through judicious policymaking.

Such comments outweighed fears related to a possible slowdown in China’s economy and boosted market sentiment. Gains for the 30-stock index were buoyed by an increase in shares of Microsoft Corporation (MSFT - Free Report) and UnitedHealth Group Inc. UNH, which gained 2.9% and 3.6%, respectively.

The index increased 0.7%, or 141.6 points, on Wednesday after Goldman Sachs posted its best day since 2009, with its shares rising 9.5%. The investment bank reported blowout earnings in Q4 2018, extending its streak of quarterly earnings beat to seven straight quarters.

The index gained 0.7% on Thursday, rising for the third straight day following an encouraging report from The Wall Street Journal. Per the report, the Trump administration is considering reducing tariffs on China in order to reassure investors and improve relations with Beijing.

The biggest gainers for the 30-stock index were The Boeing Company (BA - Free Report) , Caterpillar and Apple, shares of which gained 2%, 2.2% and 0.6%, respectively. At its session high, the Dow rose more than 250 points.

Components Moving the Index

JPMorgan Chase & Co. (JPM - Free Report) posted fourth-quarter 2018 earnings of $1.98 per share, which lagged the Zacks Consensus Estimate of $2.20. This was primarily attributable to dismal fixed income trading and underwriting business performance. However, the figure surged 85% from the prior-year quarter. JPMorgan has a Zacks Rank #3 (Hold).

Net revenues as reported were $26.1 billion, up 7% from the year-ago quarter. Rising rates and loan growth were the main reasons for the improvement. The positives were partially offset by a decrease in net interest revenues and mortgage banking fees. However, the top line missed the Zacks Consensus Estimate of $26.7 billion. (Read: JPMorgan Q4 Earnings Lag on Trading, Underwriting Woes)

Goldman Sachs’ fourth-quarter 2018 results recorded a positive earnings surprise of 23.8%, reflecting the highest net revenues since 2010. The company reported earnings per share of $6.04, comfortably beating the Zacks Consensus Estimate of $4.88.

The bottom line also compares favorably with adjusted earnings of $5.68 per share recorded in the year-earlier quarter. For full-year 2018, net income per share of $25.27 came in higher than the year-ago earnings of $9.01. Earnings also surpassed the Zacks Consensus Estimate of $24.73.

For full-year 2018, the company’s reported revenues of $36.6 billion were up 12% year over year. Moreover, revenues managed to beat the Zacks Consensus Estimate of $36 billion as well.

Zacks Rank #4 (Sell) Goldman’s net revenues were down 1% year over year to $8.1 billion in the quarter under review. However, the revenue figure handily outpaced the Zacks Consensus Estimate of $7.9 billion. (Read: Goldman Q4 Earnings Beat Estimates, Expenses Flare Up)

UnitedHealth fourth-quarter 2018 earnings of $3.28 per share surpassed the Zacks Consensus Estimate by 2.5%. The same was up 27% year over year. Higher revenues, strength in both segments — UnitedHealthcare and Optum — plus membership growth led to this outperformance.

UnitedHealth posted revenues of $58.4 billion, which beat the Zacks Consensus Estimate by 0.9%. The same was up 12.2% year over year, led by strong revenue growth rates across both UnitedHealthcare and Optum segments.

UnitedHealth reaffirmed its 2019 adjusted earnings per share guidance of $14.40­14.70 (or $13.70­14.00 on a GAAP basis including intangible amortization), which was provided last month.

The company also expects revenues of $243­245 billion and cash flow from operations of $17.3­7.8 billion for 2019. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Express Company (AXP - Free Report) came out with quarterly earnings of $1.74 per share, missing the Zacks Consensus Estimate of $1.80. This compares to earnings of $1.58 per share a year ago. American Express has a Zacks Rank #3.

The company posted revenues of $10.47 billion for the quarter ended December 2018, missing the Zacks Consensus Estimate by 1.04%. This compares to year-ago revenues of $8.84 billion. The company has topped consensus revenue estimates two times over the last four quarters. (Read: American Express Q4 Earnings and Revenues Miss Estimates)

Microsoft recently entered into an agreement with Walgreens Boots Alliance WBA, in a bid to offer innovative and cost-effective health care delivery solutions. The seven-year deal is likely to threaten the growing presence of Amazon (AMZN - Free Report) , Alphabet (GOOGL - Free Report) , among others in the health care space.

Microsoft-WBA partnership is aimed at providing personalized end-to-end health care management solutions from preventative self-care initiatives to chronic disease treatment.

Per the deal, Zacks Rank #3 Microsoft’s cloud platform Azure integrated with robust AI capabilities will be leveraged by WBA. The company will also utilize Microsoft 365. (Read: Microsoft, WBA Deal to Break AMZN, GOOGL Healthcare Dreams)

Pfizer, Inc. (PFE - Free Report) announced that the FDA has granted priority review to a new drug application (NDA) looking for approval of tafamidis. The pipeline candidate has been developed to treat transthyretin amyloid cardiomyopathy (ATTR-CM), a rare and fatal illness associated with progressive heart failure.

Zacks Rank #3 Pfizer filed two NDAs for tafamidis, one for the meglumine form (20 mg capsule) and the other for a free acid form (61 mg capsule). The priority review designation is for the meglumine form with the FDA’s decision on this NDA expected in July this year. The FDA decision for the free acid form is expected in November with the filing being given a standard review period. (Read: Pfizer Gets FDA's Priority Review for Rare Disease Candidate)

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 2.1%.

Next Week’s Outlook

Markets are enjoying an excellent run at the start of the year with multiple factors boosting stocks. China’s government has pledged to boost its economy, boosting its investor sentiment.

Further, reports have emerged that the Trump administration is considering cutting China tariffs. If the current earnings season is a good one overall, stocks could be in for a great run this year.

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