A somewhat slack economic report out of China, the world’s second-largest economy, stood in the way of stocks notching big gains Monday.
China said its second-quarter GDP rose “just” 6.2%, below economists’ forecasts calling for 6.3% and good for the country’s slowest pace of economic growth in 27 years. Chinese economists are now expecting 2019 growth of 6%, well below the original forecast of 6.5%.
Here in the U.S., the Nasdaq Composite rose 0.17% while the S&P 500 added just 0.02%, and the Dow Jones Industrial Average added 0.10%. That after the major domestic benchmarks touched record highs early in Monday’s session.
Citigroup (NYSE:C) got second-quarter earnings season rolling today, reporting that net income rose to $4.8 billion, or $1.95 per share, from $4.5 billion, or $1.63 per share, a year earlier. Analysts expected per share earnings of $1.80.
Citi is not a member of the Dow Jones Industrial Average, but the bank’s positive earnings surprise could be a sign of things to come. That would be a good thing with Dow components JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS) stepping into the earnings confessional on Tuesday.
A Tasty Winner
McDonald’s (NYSE:MCD) posted a modest gain today, but that was enough to extend its year-to-date returns to around 22%, solidifying the burger joint as one of 2019’s best-performing members of the Dow. In a note out Monday, Tesley Group reiterated an “outperform” rating on McDonald’s while boosting its price target on the stock to $230 from $210. That implies decent upside as Monday closed just above $214.
McDonald’s shares “offer both offensive and defensive investment attributes for both good times and slower times, and with its menu of both premium and value-priced options,” according to Tesley.
Piper Jaffray and Wells Fargo also boosted price targets on McDonald’s to $226 and $235, respectively.
Microsoft (NASDAQ:MSFT), the largest U.S. company by market value, reports earnings on Thursday. It is expected to be a bellwether report given the stock’s sheer heft in broad market benchmarks and technology sector funds.
Microsoft remains around the vaunted $1 trillion market cap. It appears some options traders are betting on good news from Microsoft’s earnings report. At one point on Monday, calls were outpacing puts in the name by a margin of more than 2-to-1, according to Schaeffer’s Investment Research. Historically, shares of Microsoft move nearly 3% following the company’s earnings reports.
Pharma and Politics … Again
Though in modest fashion, the Dow’s pharmaceuticals components – Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK) and Pfizer (NYSE:PFE) – each closed higher today despite drug price commentary from former Vice President Joe Biden, a 2020 Democratic frontrunner.
Biden “unveiled a healthcare plan on Monday estimated to cost $750 billion and paid for partly by higher tax rates for the wealthy and doubled tax rates on capital gains,” according to Reuters.
This is not a “Medicare For All” gambit. Rather, Biden’s healthcare proposal is seen as a refresher of Obamacare, which was implemented when he was vice president.
Bottom Line for Dow Jones Stocks
It’s earnings season, meaning it’s also complaining season for U.S. companies. Expect one of the primary complaints to be about the strength of the dollar.
“Of the 5% of S&P 500 companies that have reported so far, more than half of them cited a strong greenback as a headwind to their business in the second quarter, according to FactSet, which parsed through companies’ conference call transcripts to look for specific factors weighing on company earnings,” reports CNBC.
With the Invesco DB US Dollar Index Bullish Fund (NYSEARCA:UUP) up nearly 3% year-to-date, dollar-related earnings commentary gets us back to a familiar theme: the impetus for the Federal Reserve to lower interest rates and do so soon.
Todd Shriber does not own any of the aforementioned securities.