With some marquee earnings reports out today, it would have been reasonable to expect some more action out of the major U.S. equity benchmarks. By the time the closing bell sounded, though, Tuesday had all the appearances of just another boring summertime trading day.
The Nasdaq Composite fell 0.43% while the S&P 500 gave up 0.34%. The Dow Jones Industrial Average was mostly flat, settling down 0.09%.
Arguably adding to the disappointment that was Tuesday’s broader market action was that there was some encouraging economic data out earlier in the day. Retail sales rose for a fourth consecutive month in June, indicating that one of the primary drivers of the U.S. economy, the consumer, remains sturdy. And that data point does not even include Amazon’s (NASDAQ:AMZN) Prime Day, which shattered records.
Prime Day spanned into today and some analysts forecast $5 billion or more in sales for Amazon, easily topping 2018’s Prime Day haul of $3.2 billion. Bottom line: the consumer is in good health and that should be meaningful for riskier assets going forward.
Now let’s get into some of those earnings reports.
Dow component JPMorgan Chase (NYSE:JPM), the largest U.S. bank, was one of the blue-chip index’s standouts Tuesday, gaining 1.06%, after the company said it earned $2.59 a share on revenue of $29.57 billion. Analysts were expecting earnings of $2.51 per share and revenue of $28.9 billion.
As was noted here yesterday, net interest margins could become problematic for banks if interest rates decline. To that end, JPMorgan pared its 2019 net interest margin guidance to $57.5 billion from $58 billion.
Goldman Sachs (NYSE:GS) was another Dow leader today, adding 1.87% after the investment bank said it earned $5.81 a share on revenue of $9.46 billion. Analysts expected earnings of $4.89 per share on revenue of $8.83 billion.
“Institutional client revenue, which includes trading, slipped 3%, while investment banking revenue was down 9%. However, revenue from the bank’s investing and lending business rose 16%, its highest quarterly performance in eight years,” according to Reuters.
A Beat, but Disappointment
Pharmaceuticals giant Johnson & Johnson (NYSE:JNJ) slipped 1.64% despite delivering an upbeat second-quarter report. The healthcare company said it earned $2.58 per share on sales of $20.56 billion. Wall Street expected a profit of $2.46 per share on sales of $20.29 billion.
More importantly, JNJ boosted its 2019 sales forecast, excluding currency movement, to $82.4 billion to $83.2 billion, from an original range of $82 billion to $82.8 billion and the stock still declined. Credit Suisse resumed coverage of JNJ today with a $156 price target, implying significant upside from current levels.
Once again, Dow Inc (NYSE:DOW) was one of the Dow’s best performers today, surging 2.73%. The stock has been on a torrid pace as of late. Investors considering the chemical maker may want to go here to mull over some of the bullish catalysts for the name.
Today’s earnings reports were mostly solid. It’s certainly hard to quibble with JNJ raising revenue guidance, but plenty of tests remain this week and trade is clearly still an issue. President Donald Trump confirmed as much, noting the U.S. and China still have a long way to go on trade.
Thursday is potentially significant day on the earnings front with Microsoft (NASDAQ:MSFT) and UnitedHealth (NYSE:UNH) among the Dow components reporting. Investors looking for a particular factor to watch should consider profit margins, regardless of company or sector.
“Many investors and analysts say a potential decline in profit margins—a measurement of how much a company’s sales exceed its costs—is more worrisome than contracting earnings in the second quarter,” according to the Wall Street Journal.
Todd Shriber does not own any of the aforementioned securities.
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