By Emily Bary
The Dow Jones Industrial Average increased more than 22% in 2019 and is already up 2.2% through three weeks of 2020, but it is about to face its biggest test of the young year, and potentially many years.
Nearly half of the 30 Dow /zigman2/quotes/210598065/realtime DJIA -1.69% components are scheduled to report results from the holiday season in the coming week, which will be by far the busiest week of the earnings season.
There are 14 Dow companies expected to report, the most companies from the blue-chip index to report in a single week since at least 2014, a group that includes two trillion-dollar market caps in Apple Inc. /zigman2/quotes/202934861/composite AAPL -1.44% and Microsoft Corp /zigman2/quotes/207732364/composite MSFT -0.92%
Plenty of non-Dow companies will throw their numbers in as well — 141 of the S&P 500 companies are expected to report, including Facebook Inc. /zigman2/quotes/205064656/composite FB -2.53% , Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -0.64% and Advanced Micro Devices Inc /zigman2/quotes/208144392/composite AMD -4.27%
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The 85 members of the S&P 500 that have reported results thus far have seen net income fall by 0.3% on average from a year ago, though Credit Suisse Chief U.S. Equity Strategist Jonathan Golub said it’s tough to make broader inferences from early reports given different sectors tend to post results at different parts of the earnings cycle. More than a third of S&P 500 that have reported so far sit in the financials sector, which could skew those results.
The FactSet consensus currently calls for net income to fall by 1.9% for the S&P 500, based on a blend of reported results and analyst projections, which would mean the current earnings recession would swallow all of 2019’s results.
Here’s what to watch for in the week ahead.
The wave of Dow components
Apple is in a much different position than it was last time it had to report holiday results. The stock is trading at all-time highs as investors give the company more credit for its services efforts and look ahead to the expected launch of 5G iPhones later this year. The Tuesday afternoon report will include the first full quarter of availability for the iPhone 11 line and the new Apple TV+ streaming service, but a different star will likely shine when the numbers come out: Apple’s AirPods are said to have been strong holiday sellers.
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Boeing is bracing for another uncomfortable report Wednesday morning, as the company recently delayed the return of its troubled 737 Max jets to mid-2020 from an earlier goal of the spring. The focal point of the earnings report and subsequent call will be Boeing’s outlook for the year as it manages the Max fallout as well as a working-capital crunch.
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Microsoft officially ended support for its Windows 7 operating system in mid-January, and that looming deadline might have helped the company toward the end of 2019. Both Gartner and IDC pointed to a pick-up in overall PC shipments for the fourth quarter, citing “vibrant business demand for Windows 10 upgrades” and predicting that the momentum could continue in geographies that have yet to upgrade. The company’s Wednesday report and outlook should provide more clues about that trend, while also focusing on the growing Azure cloud business.