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Dow Jones Today: Fed Watch Begins

Todd Shriber

With arguably one of the most widely-anticipated Federal Reserve meetings in recent memory kicking off later this week, stocks did not move much Monday. Investors waited to see if the central bank will deliver a highly-desired interest rate cut.

At the close, the Nasdaq Composite slipped 0.44% as the technology sector was one of Monday’s laggard groups. That hampered the S&P 500, in which technology is also the largest sector allocation, sending the benchmark U.S. equity gauge lower by 0.16%. The Dow Jones Industrial Average started the week higher by 0.11%.

In terms of Dow offenders, pharmaceuticals giant Pfizer (NYSE:PFE) was a problem, sagging 3.81% after the company said it is spinning off its UpJohn business, which manufacturers some of Pfizer’s older drugs and some generic brands, and that the business will merge with Mylan (NYSE:MYL). It was somewhat surprising to see Pfizer trade lower because the deal was mostly applauded by analysts.

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“A Pfizer Upjohn and Mylan merger would create a leading branded and generics company,” according to JPMorgan. “For Pfizer, the transaction could create a clean, innovative biopharma company positioned for above industry average growth.”

Additionally, Pfizer reported second-quarter results Monday, saying it earned 80 cents a share, beating the Wall Street estimate of 75 cents. Maybe today’s slide in the stock will prove to be a buying opportunity.

Better Things for the Dow

With the Dow being the only one of the three major U.S. indexes finishing in the green today, there were bound to be some names to offset the weakness in Pfizer. Apple (NASDAQ:AAPL) contributed to that cause, gaining 1.94%. The iPhone maker reports earnings after the bell tomorrow.

“For the quarter, Wall Street analysts are expecting fiscal-third-quarter revenue of $53.3 billion, with earnings of $2.09 per share,” according to Barron’s. “Apple’s own guidance called for revenue in the $52.5 billion-$54.5 billion range, gross margins of 37%-38%, operating expenses of 8.7%-8.8%, other income of $250 million, and a tax rate of 16.5%.”

Among other issues, investors should listen for Apple’s comments on 5G and whether the company will have all of the iPhones coming in 2020 ready to be 5G compatible.

Dow Oil Bounce

Oil prices rallied today on speculation that the Federal Reserve will lower rates this week. Lower rates could weaken the dollar, meaning U.S.-based oil exporters would see profits increase after converting stronger foreign currencies into weaker greenbacks.

Worth noting is that Dow components Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) finished modestly higher today. Both companies report second-quarter results this Friday.

“Exxon and Chevron usually keep earnings news releases and calls with analysts strictly about their quarterly numbers, but investors might be able to gauge their mood toward mergers and acquisitions when talk turns to expanding in the U.S. or their inventories,” according to MarketWatch.

Exxon and Chevron are expected to earn 69 cents a share and $1.78, respectively.

Dow Jones Today: Bottom Line

It’s hard to say “don’t get too wrapped up in the Fed meeting,” but the advice is worthy nonetheless. After all, guess what happens on Tuesday in addition to Apple earnings? Representatives from the U.S. and China sit down for trade talks in Shanghai.

Hopefully, the talks go smoothly and President Donald Trump isn’t compelled to vent any frustrations on Twitter. While President Trump is unlikely to impose new tariffs on the world’s second-largest economy, it’s unlikely that whatever materializes tomorrow in Shanghai will be a “fix all” for the strained trade relationship between the two global heavyweights.

Todd Shriber doesn’t own any of the aforementioned securities.

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