We see a bifurcated pre-market on the major indexes this morning. The Nasdaq is looking positive, +100 points at this hour, or +0.46%, while the S&P 500 is +0.08% and the small-cap Russell 2000 +0.66%. But it’s the blue-chip Dow which is -260 points (-0.61%) currently, exclusively due to UnitedHealthcare (UNH) getting hammered ahead of today’s open.
The Wall Street Journal reports this morning that the U.S. Department of Justice is bringing a civil case against UnitedHealthcare — the largest healthcare company in the world at $462 billion in market cap — regarding billing practices at its Medicare Advantage program. Recall UNH is also the company whose CEO was murdered on the streets of New York City in early December. It’s been a star-crossed quarter for the healthcare giant, to say the least.
This news has also taken down other health insurers like Humana (HUM) and Cigna (CI), though neither of those firms have been implicated in this new report. The question is — based on the hugeness and ubiquity of companies like UNH — whether this big sell-off is providing a buying opportunity. Currently, the Zacks Rank is a #3 (Hold), with a Value - Growth - Momentum score of C.
After today’s opening bell, we get rather busy with economic reports. Among them, S&P flash Manufacturing and Services PMI for February hit the tape. Services are expected to move incrementally down month over month and Manufacturing incrementally up, but both should remain comfortably above the 50-threshold, which determines expansion from contraction.
Also, final February Consumer Sentiment is expected to stay steady at 67.8, which would be somewhat better news than yesterday’s Leading Economic Indicators (LEI), which illustrated a decline in sentiment. If anything, these reports show us the brackish waters in which market participants currently see the overall economy. Most are remaining hopeful, but also paying attention to some potential disruptive elements.
Existing Home Sales for January are expected to tick down a tad month over month, to 4.13 million seasonally adjusted, annualized units from 4.24 million from December. These are both notably better than the 12-month low we saw back in September: 3.83 million. In any case, we expect to stay at low levels of household formation as long as mortgage rates are above 7%, which they are likely to be until the Fed starts cutting interest rates.
Next week, in addition to a new Personal Consumption Expenditures (PCE) report a week from today, we’ll see the last big names on Wall Street reporting earnings results. These include big-box retailers like Macy’s (M) and Home Depot (HD) on Tuesday, and cloud-computing giants like Salesforce (CRM) Wednesday.
Also on Wednesday we will see the earnings report from the most consequential stock of the past two years: NVIDIA (NVDA). The graphics chips maker is up more than +6% over the past week of trading, but just +4.3% year to date — roughly in-line with the S&P 500. Over the past year, NVIDIA shares have grown +107%, and a jaw-dropping +1800% over the past five years.
The stock currently carries a Zacks Rank #2 (Buy), and its forecasts for fiscal Q4 are still uncommonly strong: +61.5% earnings growth and +70.7% revenue growth. NVIDIA has not missed on earnings in more than two years, and, despite its extraordinary $3.4 trillion market cap, still trades at a Price-to-Earnings-Growth ratio around +2.
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Salesforce Inc. (CRM) : Free Stock Analysis Report
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Macy's, Inc. (M) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
The Home Depot, Inc. (HD) : Free Stock Analysis Report
Humana Inc. (HUM) : Free Stock Analysis Report
Cigna Group (CI) : Free Stock Analysis Report
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