The major U.S. equity benchmarks probed new highs again Tuesday, but after few days of solid upside, there was a listless feel to the action today, broadly speaking.
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On the trade front, China remains insistent that President Trump backed away from tariffs if the two sides are to reach a trade accord of any substance.
According to Reuters, “Apart from hopes of a resolution to the trade war, stocks have received a boost from a largely better-than-expected third-quarter earnings season, the Federal Reserve’s interest rate cut and an upbeat economic data” last week have fueled the recent Wall Street rally.
Those have proven to be important catalysts, but they were mostly absent today. Among members of the Dow Jones Industrial Average still to report earnings, Walt Disney (NYSE:DIS) does that Wednesday after the close of U.S. markets.
For today, the action was fair, not great, but it was enough to lift the Nasdaq Composite by 0.02%, while the S&P 500 inched lower by 0.12%. The Dow Jones Industrial Average added 0.11% with 16 of its 30 components higher in late trading.
That is a rare sentiment given that Walgreens Boot Alliance (NASDAQ:WBA) has been one of the worst-performing members of the Dow this year, but for one day at least, that status changed as Walgreens was the Dow Jones’ leader today.
To be fair, shares of Walgreens are higher by almost 7% over the past week and 12.60% this month, perhaps indicating that someone may have known something. That something being that the company is mulling going private in a transaction that could be worth $55 billion, slightly more than its $50.83 billion market capitalization entering Tuesday. If Walgreens does that, it would mark the largest leveraged buyout on record.
“In recent months, Walgreens has held preliminary discussions with some of the world’s largest private equity firms about putting together what would be the biggest ever leveraged buyout, the sources said,” according to Reuters.
As noted earlier, some familiar names commanded plenty of headlines among Dow Jones stocks today. Let’s start with McDonald’s (NYSE:MCD), which regained some of the ground lost Monday in the wake of now former CEO Steve Easterbrook’s departure.
One interesting item out today pertained to Chris Kempczinski, who is replacing Easterbrook. That report noted that the new CEO isn’t yet an actual shareholder in the world’s largest fast food chain, though that’s likely to change sometime very soon.
McDonald’s shares performed well under Easterbrook, prompting Wall Street to speculate if the good times can continue with Kempczinski running the show. The new CEO faces some obvious challenges.
“Appearances aside, the new McDonald’s chief faces an uphill climb. Same-store sales growth is decelerating. Earnings estimates have been revised lower,” according to Barron’s.
Regarding the other repeat appearance here, that’s Boeing (NYSE:BA), which gained 2.24% today, ranking as one of the Dow’s top performers.
In terms of Boeing headlines today, the bag was undoubtedly mixed. In an interview with CNBC, Chairman Dave Calhoun praised CEO Dennis Muilenburg for his performance during the 737 MAX controversy, one that could linger for longer than investors would like.
While Muilenburg is likely to forego compensation bonuses this year, that’s not much compensation for investors that were hoping the 737 MAX could be in the skies before the end of 2019 or early 2020. The timeline for that happening could stretch into 2021, said Calhoun.
Keeping with the theme of familiarity, let’s not forget that Apple (NASDAQ:AAPL) launched its streaming service, Apple +, this month. It’s still early, but reviews of some of Apple’s original content and Apple+ itself thus far have been tepid, but analysts still believe in streaming as a potential catalyst for the already hot stock.
“We don’t see the present content slate as worth $5/month in comparison to more robust, built-out content libraries of competitors, but such competition does not matter much, in our view, when upwards of 100 million-pluis iOS users (if the present free for a year promotion sustains into 2020) will have access to TV+ content free of charge for a year,” said Deutsche Bank analyst Jeriel Ong in a note to clients.
Bottom Line on the Dow Jones Today
With third-quarter earnings season winding down, it may be instructive to look at what the fourth quarter may have in store.
“Expectations for earnings growth for Q4 2019 have been falling over the past few months. On June 30, the estimated earnings growth rate for Q4 2019 was 5.6%. By September 30, the estimated earnings growth rate had fallen to 2.4%. As of November 1, the earnings decline stood at -0.4%,” according to FactSet. “Five of the 11 sectors are now projected to report a year-over-year decrease in earnings for the fourth quarter, led by the Energy (-29.7%) and Consumer Discretionary (-10.3%) sectors.”
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
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