On Monday, the major U.S. equity benchmarks broke out to all-time highs, but as was noted in the wake of yesterday’s bullishness, domestic stocks have had difficulties building on breakouts for over a year now. One trading day does not confirm that will be the case this time around, but stocks retreated on Tuesday.
Some of today’s malaise can be attributed to Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG), which declined following a disappointing earnings report issued yesterday after the market closed. The internet search giant reported earnings of $10.12 a share on revenue of $40.5 billion while analysts expected earnings of $12.42 on revenue of $40.32 billion.
On the company’s earnings conference call, CFO Ruth Porat made remarks about year-over-year revenue variability in coming quarters, something that apparently spooked some investors today.
Weakness in shares of Alphabet, a major part of the Nasdaq-100 Index, explains why the Nasdaq Composite lost 0.59% today while the S&P 500 retreated just 0.1%. The Dow Jones Industrial Average declined a mere 0.09% as just 11 of its 30 member firms were higher in late trading.
Help From Healthcare
I’ve frequently noted that the healthcare sector, the second-largest group in the S&P 500, has been a dud for much of this year, but that wasn’t the case on Wednesday. On the back of solid third-quarter earnings reports, Merck (NYSE:MRK) and Pfizer (NYSE:PFE) were the Dow’s top two performers today.
Merck jumped 3.53% to take the top spot among Dow members today after the company said it earned $1.51 a share on sales of $12.1 billion in the third quarter, easily topping Wall Street estimates of $1.23 and revenue of $11.59 billion.
Merck said it expects full-year earnings of $5.12 and $5.17 a share, up from previous guidance of $4.84 to $4.94. The company also forecast 2019 revenue of $46.5 billion to $47 billion, up from a prior forecast of $45.2 billion to $46.2 billion.
Pfizer gained 2.48% after the company joined Merck in boosting 2019 guidance. Pfizer now expects to earn $2.94 to $3.00 per share this year, well ahead of previous guidance of $2.76 to $2.86.
Strength in Merck and Pfizer today was enough to move UnitedHealth (NYSE:UNH) and Walgreen Boots Alliance (NASDAQ:WBA) higher as well. UNH is the best-performing name in the Dow this month.
Something Of A Surprise
The brief Boeing (NYSE:BA) respite in this space is over, at least for today. I’ll give the stock some credit for gaining 2.36% while CEO Dennis Muilenburg was testifying before the Senate about the controversial 737 MAX jet.
Then again, the skeptic in me is inclined to say it sure would have been nice if the Lion Air and Ethiopian Airlines flights using the 737 MAX didn’t crash, touching off a long, still-running saga related to that plane.
“We’ve dedicated all resources necessary to ensure that the improvements to the 737 MAX are comprehensive and thoroughly tested,” according to Muilenburg’s prepared remarks. “This process has taken longer than we originally expected.”
Interesting Item
Shares of Johnson & Johnson (NYSE:JNJ) were halted in late trading pending release of news. The news turned out to be that Johnson and Johnson said it found no asbestos in the baby powder it recalled. JNJ was trading slightly lower prior to the trading stop, but is up over 3% after the close.
Bottom Line
As the market continues working through third-quarter earnings, it’s worth noting that, broadly speaking, the results have been better-than-expected. However, it was also expected that due to the U.S./China trade tensions, which ran hot for much of the September quarter, some companies with significant ex-U.S. exposure are reporting slack numbers. Data confirm as much.
“The blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings decline for the S&P 500 for Q3 2019 is -3.7%. For companies that generate more than 50% of sales inside the U.S., the blended earnings decline is -0.8%. For companies that generate less than 50% of sales inside the U.S., the blended earnings decline is -9.1%,” according to FactSet research.
Apple’s (NASDAQ:AAPL) Wednesday report could be one more test on the global revenue front.
As of this writing, Todd Shriber did not own any of the aforementioned securities.