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Third-Quarter Outlook: Slow Growth Is Not No Growth—Earnings Still Rising

Adviser Investments’ Third-Quarter Outlook Webinar, Slow Growth Is Not No Growth—Earnings Still Rising, features commentary from Chairman Dan Wiener, Director of Research Jeff DeMaso and Chief Investment Officer Jim Lowell as well as perspectives from other members of our investment team. Among other topics, the Webinar offers analysis and insight into trade-war/tariff negotiations, global and U.S. economic indicators and stock and bond markets and also answers live questions from its attendees.

Amazon Cloud Business Revenue up 49%

Chris Hagan, vice president at Adviser Investments, has the market analysis for Thursday, July 26. Facebook’s (ticker: FB) nosedive continued, with the stock falling 19%, losing nearly $120 billion in market cap—the company’s largest one-day loss ever. Meanwhile, Amazon’s stock rose over 4% in after-hours trading owing to the company’s historic quarterly profits and a 49% increase in year-over-year cloud business revenue. Although Chipotle closed the day down 1%, the stock was up 6% in after-hours trading on encouraging news of a continued turnaround. As we head into the weekend, we’ll watch for Friday’s GDP and consumer sentiment numbers.

Facebook Drops 10%; Amazon Gains 2%

Megan Higgins, manager at Adviser Investments, has the market analysis for Wednesday, July 25. The Dow Jones Industrial Average, S&P 500 and NASDAQ Composite rose 0.7%, 0.9% and 1.1%, respectively, on encouraging news of a trade agreement between the U.S. and the European Union. Despite those gains, ongoing tariff negotiations continue to impact U.S. markets; today, we saw declines for automakers Ford Motor, Fiat Automobiles, Chrysler and General Motors. Facebook’s plummet was arguably the biggest news of the day—falling more than 10% on disappointing quarterly earnings. On the other hand, Amazon gained nearly 2% in anticipation of Thursday’s earnings call. Tomorrow, we’ll be watching for reports from Starbucks, Comcast and McDonald’s.

Dan Wiener Talks Fund Managers and Tax Inefficiencies

MoneyLife Market Call’s Chuck Jaffe interviewed Dan Wiener, Adviser Investments’ chairman, to learn more about his “buy the manager, not the fund” approach and Vanguard’s recently launched factor funds. Dan emphasizes the importance of coupling great active managers with low operating expense ratios. He also names two managers he’s watching: Bryan Krug, portfolio manager for Artisan High Income Fund (ticker: ARTFX), and Baillie Gifford, who currently co-manages several Vanguard funds. On the subject of Vanguard’s six new factor ETFs, Dan opines that, “Factors are the bright, shiny new toy in a lot of mutual fund companies’ toy chests right now.” Just five months since inception, Vanguard’s factor funds have outperformed the market; however, investors should be mindful of tax inefficiency risks.

Biogen Reports 15% Earnings Growth, 9% Revenue Gains

Ryan Christensen, account executive at Adviser Investments, has the market analysis for Tuesday, July 24. The Dow Jones Industrial Average and S&P 500 gained 0.8% and 0.5%, respectively, while the NASDAQ Composite declined fractionally. For earnings, we saw Biogen (ticker: BIIB) top expectations with 15% earnings per share growth and 9% revenue advances. BIIB closed the day up nearly 6%. Investors continue to react favorably to Biogen’s stock as the company is scheduled to present clinical trials on its experimental BAN2401 therapy at this week’s Alzheimer’s Association International Conference.

Jim Lowell Anticipates Market Volatility

Adviser Investments’ Chief Investment Officer Jim Lowell joined Bloomberg Daybreak Asia to discuss politics, trade wars, second-quarter earnings, emerging markets and more. He sees the potential for stock and bond market volatility as we look past earnings to the November midterm elections. The threat of a trade war increases the possibility of Wall Street turbulence. Until then, however, Jim remains cautiously optimistic because of strong economic data, U.S. consumer health and positive earnings results. That said, Jim believes that U.S. stock markets could be nearing a “tipping point” at which higher interest rates and a stronger dollar may begin to impact stock performance.

Alphabet Stock up 3.5% Despite $5 Billion Antitrust Fine

Alexis Melvin, associate at Adviser Investments, has the market analysis for Monday, July 23. It was a quiet day for the major U.S. stock indexes: The Dow Jones Industrial Average declined just under 0.1% and the S&P 500 and NASDAQ Composite advanced 0.2% and 0.3%, respectively. Alphabet (ticker: GOOG) surpassed quarterly sales and earnings expectations despite the European Union’s recent $5 billion antitrust fine against the company. GOOG gained over 3.5% in after-hours trading. Meanwhile, we also saw U.S. existing home sales decline for the third consecutive month, down 0.6% in June. Tomorrow, Harley-Davidson, Verizon and Biogen will report earnings.

Skechers Drops 23% on 24% Earnings Per Share Decline

Diana Linn, client service associate at Adviser Investments, has the market analysis for Friday, July 20. We saw fractional losses (less than 0.1%) across the Dow Jones Industrial Average, S&P 500 and NASDAQ Composite indexes today. There were a few earnings reports to note: Although General Electric (ticker: GE) beat quarterly expectations—by just $0.01 per share—its stock closed the day down 4%. GE’s power division continues to struggle, but its strong aviation and health care units have partially offset those challenges. Meanwhile, Skechers’ stock dropped 23% on news of a 24% decline in earnings per share versus the second quarter of 2017. Next week, we’ll be watching for earnings from Alphabet, Whirlpool, Verizon and Boeing as well as reports on new and existing home sales and consumer sentiment.

Jobless Claims Near 50-Year Low

Brian Mackey, senior research analyst at Adviser Investments, has the market analysis for Thursday, July 19. The Dow Jones Industrial Average closed down 0.5% and the S&P 500 and the NASDAQ Composite each declined 0.4%. President Trump’s critique of the Federal Reserve’s interest-rate hikes dominated headlines, with bond yields dropping immediately following his interview. We also saw weekly jobless claims data released—revealing a nearly 50-year low among people applying for benefits. This is a positive indicator for the broader economy because it implies a strong employment picture and, thus, a healthy consumer.

United Continental Advances 8% Despite 39% Spike in Fuel Cost

Todd Peters, senior vice president at Adviser Investments, has the market analysis for Wednesday, July 18. Textron topped expectations, reporting a 53% gain in income from continuing operations. Similarly, and despite a 39% spike in year-over-year fuel costs, United Continental’s stock advanced 8% on higher-than-expected quarterly results and solid forward guidance. Meanwhile, housing stocks were weak following the release of June housing starts data, which reflected a 12% decline since May. Despite those numbers, demand remains strong with 50% of U.S. builders reporting June price increases.

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