A Good Start. The three main U.S. stock indexes finished with substantial gains on Tuesday as third-quarter earnings reports began to roll in. Positive results from blue-chip companies such as JPMorgan Chase (ticker: JPM), Johnson & Johnson (JNJ), and UnitedHealth Group (UNH) drove stocks higher. The renewed hope for a Brexit deal might have helped boost sentiment. In today’s After the Bell, we...
- check on the latest earnings reports from the biggest companies;
- look into Wall Street’s expectations for third-quarter results;
- and watch the global economic forecast get cut again to a record-low since the financial crisis.
Earnings Trump GDP Data
Stocks jumped higher on Tuesday, as investors embrace third-quarter earnings season with optimism. The Dow Jones Industrial Average has gained 237.44 points, or 0.89%, to close at 27,024.80. The S&P 500 is up 29.53 points, or 1.00%, to finish at 2995.68, and the Nasdaq Composite rose 100.06 points, or 1.24%, to close at 8148.71.
Companies kicked off the reporting season on a positive note. All the S&P 500 companies that reported today—except for Goldman Sachs Group (GS) and Wells Fargo (WFC)—beat third-quarter consensus expectations for earnings per share.
But even the two major banks that missed views saw their stocks close with gains. The financial sector has been out of favor for most of the year, and banks have some of the lowest valuations in the stock market. Investors might be finally gravitated to the cheaply traded sector and bet on its rebound. For Wells Fargo, investors are looking forward to a turnaround under Charles Scharf, who will take the CEO post on Oct. 21. Wells Fargo also has a substantial share-repurchase program and one the highest dividend yields among peers at 4%.
Other nonbank reporters including asset manager BlackRock (BLK), J&J, and UnitedHealth saw their stock end Tuesday with gains of 2.4%, 1.6%, and 8.2%, respectively.
Still, amid a slowing global economy and trade-related uncertainties, Wall Street expects overall earnings of S&P 500 companies to come lower than last year for a third straight quarter, according to FactSet data. This could mark the first nine months of declining earnings since the period from the fourth quarter of 2015 through the second quarter of 2016. According to FactSet, analysts are looking for S&P 500 earnings to decline 4.6% in the third quarter as compared with the same period last year.
Editor's Choice
The International Monetary Fund on Tuesday cut its global economic forecast again for the year to the slowest pace since the global financial crisis. 2019 growth is now expected at 3%, revised down by 0.3 percentage points from the previous estimate in April. Projected growth in 2020 was also revised down by 0.2 percentage points to 3.4%. The report estimates that the trade tension between the U.S. and China will reduce the level of global gross-domestic-products in 2020 by 0.8%.
The latest downbeat outlook sets the stage for this week’s annual IMF meetings that draws global finance ministers and central bankers together in Washington, D.C., to discuss the health of the world economy and their financial priorities. “At 3% growth, there is no room for policy mistakes and an urgent need for policy makers to support growth,” IMF’s Director of Research Gita Gopinath said in a statement.
The partial trade deal between the U.S. and China—announced last Friday—seems underwhelming to investors so far, as details haven’t been hammered out yet and key structure issues remained off the table.
Fund managers, for one, aren’t so euphoric. According to the latest Bank of America Merrill Lynch Global Fund Manager Survey, the cash level in their portfolios has increased to 4.0% in October, hitting the highest reading year-to-date and above the survey’s historical average of 3.6%.
Write to Evie Liu at evie.liu@barrons.com
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October 16, 2019 at 04:37AM
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Dow Jones Industrial Average Rose as Strong Earnings Trump Nearly Everything - Barron's
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