Dow Outperforms After Blowout UnitedHealth Earnings

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Stocks made modest moves Friday as Wall Street weighed the start of second-quarter earnings season.

Higher-than-expected profits for JPMorgan Chase (JPM) and Wells Fargo (WFC) failed to catapult the financial stocks higher, though the same can't be said for insurance giant UnitedHealth Group (UNH), which rallied hard in the wake of its results.

Taking a closer look at some of the numbers, JPMorgan said earnings jumped 58% year-over-year to $4.37 a share, while revenue was up 34% to $42.4 billion thanks to higher interest rates and impressive loan growth. Net income attributable to the bank's May purchase of embattled regional lender First Republic was $2.4 billion.

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Higher interest rates and loan growth helped Wells Fargo report a 20.5% year-over-year jump in its top line to $20.5 billion, while earnings surged 66.7% to $1.25 per share.

"The bottom-line impact here is that the overall health of the banking system is better than feared, at least for the largest banks in the system," says Brian Mulberry, client portfolio manager at Zacks Investment Management. One major area of pushback against the Fed is that higher rates will cause more banks to fail, but after this morning's results, it seems less likely to happen, Mulberry notes, adding that if strong results from banks continue, "there will be much less worry if the Fed needs to raise rates again in September."

UnitedHealth earnings impress

Despite the impressive results, JPM managed a 0.6% gain, while WFC slipped 0.3%. UnitedHealth Group, on the other hand, popped 7.2% after earnings, easily making it the best Dow stock today. The insurance company reported higher-than-expected Q2 earnings of $6.14 per share and revenue of $92.9 billion, and lifted its full-year forecast.

At more than $480 a share, UNH has the greatest weighting of all 30 stocks in the price-weighted Dow Jones Industrial Average, which helped it finish up 0.3% at 34,509. Meanwhile, the broader S&P 500 (-0.1% at 4,505) and the tech-heavy Nasdaq Composite (-0.2% at 14,113) suffered modest losses. Still, all three benchmarks closed higher on the week.

Netflix, Tesla earnings on deck

Today's handful of earnings reports kicks off what will be a busy few weeks of corporate results. Expectations are low as companies have been "battling headwinds beginning with persistent inflation, which has led to the Fed's 16-month-long series of interest rate increases and a decline in consumer demand," says Anthony Denier, CEO of Webull, a commission-free trading platform.

Analysts expect Q2 earnings to fall 7.2% from a year ago, Denier adds, which would mark the third consecutive decline in quarterly earnings and the steepest pullback since the second quarter of 2020. But on a positive note, low expectations create a low bar for companies to clear, which could result in upside surprises, the CEO notes.

Earnings from financial firms will remain in focus next week, but results from several other sectors, including communication services and consumer discretionary, will start to filter in as well. Among the key reports on next week's earnings calendar are Netflix (NFLX), Tesla (TSLA) and American Express (AXP).

With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.