U.S. Stocks Rise on Strong Earnings Start
October 15 2019 - 3:35PM
Dow Jones News
By Karen Langley and Anna Isaac
U.S. stocks climbed Tuesday as investors cheered strong results
from banks and health-care companies at the unofficial start of the
third-quarter earnings season.
The outlook for profits had dimmed in recent months, with Wall
Street analysts lowering earnings expectations for all 11 sectors
of the S&P 500.
But UnitedHealth Group, Johnson & Johnson and JPMorgan Chase
-- all components of the Dow Jones Industrial Average -- kicked off
the reporting period with a shot of optimism. Goldman Sachs Group
shares also climbed, despite a mixed report.
Through mid-afternoon, those four stocks contributed nearly 180
points to the blue-chip index. By day's end, the Dow added 237
points, or 0.9%. The S&P 500 rose 1%, led by the health-care
sector. The Nasdaq Composite added 1.2%.
The good news was welcomed by investors, who have been
monitoring signs of slowing global growth as the long-simmering
trade dispute with China unfolds.
Analysts expect the companies in the S&P 500 to report a
4.7% decline in profits for the quarter, according to FactSet. That
would mark the third consecutive quarter of lower earnings -- the
longest such streak since a period of softening global growth from
late 2015 to early 2016.
Among the companies scheduled to report Wednesday are Bank of
America, Netflix, CSX and Alcoa.
Shares of UnitedHealth Group rose 8.3% after the company posted
third-quarter results that beat expectations and raised its profit
guidance for the year. That spurred a rally in shares of other
health insurers that had been battered by political headwinds this
year ahead of the 2020 election. Anthem added 6.2%, Cigna gained
5.9% and Centene climbed 3.1%.
Also in the health-care space, Johnson & Johnson shares
added 1.8% after the company raised its financial forecast for the
rest of 2019, despite grappling with a heavy case load of
litigation.
Elsewhere, JPMorgan Chase, the nation's largest bank by assets,
rose 3.4% after the bank beat profit expectations. The company
continued to see strength in both its consumer and investment-bank
businesses. Net interest income rose, despite the Federal Reserve
cutting interest rates in recent months.
"That's a sigh of relief after a lot of consternation going into
the earnings season around banks in general," said Andy Braun, a
portfolio manager at Pax World Funds.
Goldman shares added 0.5%, despite reporting a lower profit that
was dinged by its Wall Street businesses.
As investors continue to look for fresh signs about the future
course of interest rates, Federal Reserve Bank of St. Louis
President James Bullard said Tuesday in London that the U.S.
Federal Reserve could cut its key interest rate again to cushion
the economy against threats to growth. The U.S. economy is slowing
and faces a number of "downside risks" that could require a further
"insurance" move from policy makers, Mr. Bullard said.
The yield on the U.S. 10-year Treasury rose to 1.773%, from
1.748% Friday. The bond market was closed Monday for Columbus
Day.
Meanwhile, the British pound rallied Tuesday on speculation that
the U.K. and European Union may be close to finishing a draft
Brexit agreement. The pound climbed 1.3% against the U.S. dollar,
reaching its highest in about four months and putting it on course
to wipe out losses from earlier this year.
In Asia, Chinese stocks fell as fresh economic data added to
concerns about weaker growth prospects and the government's ability
to strike a trade agreement with the U.S.
The Shanghai Composite gauge dropped 0.6% as official data
showed inflation reached a near six-year high last month, driven by
rising pork prices. This comes amid signs of slowing growth and
trade tensions for the world's second-largest economy.
"China's not going to change its core economic policy to placate
Washington, be it on intellectual property or similar," said Rory
Green, an economist at investment research firm T.S. Lombard. "They
are accepting slower growth, they are not going to do a big credit
stimulus as we've seen in the past; markets are slowly realizing
that."
Write to Anna Isaac at anna.isaac@wsj.com
(END) Dow Jones Newswires
October 15, 2019 16:20 ET (20:20 GMT)
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