Dow Jones Falls as Reporting Season Unfolds

By Dale Gillham | Published 21 October 2019

Last week the Dow Jones was a tail of two parts given that it opened at 26,787 points and traded up for two days before falling away later in the week closing 17 points down for the week. And with reporting season upon us, it looks like the Dow will continue to fall away.

During September retail sales declined by 0.03 percent for the first time in seven months. While retail sales were down, we need to remember they were up around the same amount in August; therefore the decline in September is nothing to be concerned about and is likely to only be down in the short term.

China’s economic growth has also weakened given that that GDP only grew by around 6 per cent in the third quarter from a year ago. So, the decline in retail sales and China’s GDP may just be a flow effect of the US China trade war tariffs.

Currently, unemployment and other economic figures are looking better, and the US China trade war appears to be coming to an end; therefore, as I previously mentioned the slump in retail sales is likely to only be short term. We also need to be aware that Brexit is also nearing an end, so once this and the China deal is put to bed, I believe the Dow Jones Index will be strong.

While I believe the Dow Jones needs to pull back slightly with my target between 25,205 points and 24,538 over the next two to four weeks, everything is looking positive for 2020.

US reporting season has started on good news with Coca Cola and American Express reporting results ahead of analyst expectations. JP Morgan and Bank of America also reported solid results.

Proctor and Gamble (P&G) is currently doing well, and is one of many consumer staple stocks doing well this year. P&G is up 29 percent in 2019 and they are due to report on Tuesday, so it will be interesting to see if they too also beat analyst expectations. Also reporting on Tuesday is McDonald's, which is currently up 19 percent.

On Wednesday Microsoft, Boeing, Tesla and Ford all report, and with car sales down in September it will be interesting to see the results.

So where are the opportunities moving forward?

In 2019 Energy is down -0.61 percent, while Healthcare is up 6.04 percent and Consumer staples is up 13.85 percent.

While all three sectors have under-performed this year, I believe some good buys will come from these sectors moving forward. For example, after falling nearly 30 percent since 2018 United Health was up 10 percent last week and is starting to look good. So while I still like the technology sector, which is up 30.46 percent in 2019, in short, there are some good value stocks in these other sectors for the astute investor, if you are willing to take the time to find them.

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