Shares of banks, industrials and health-care companies propelled the Dow Jones Industrial Average to 19000 on Tuesday. The bets on those sectors largely reflect investors' expectations of looser regulation, and higher growth and interest rates under a Trump administration. Here is a look at four companies that have benefited from those assumptions, contributing the most points to the blue-chip index's 1,135.59-point gain since the Dow last closed below 18000 on Nov. 4.
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Goldman Sachs Group Inc. (contributed 240.99 points to the Dow industrials since Nov. 4) and J.P. Morgan Chase & Co. (73.76 points)
The two banks have been big factors in the blue-chip index's rally this month, largely because of the improved outlook for bank earnings and the rebound in long-term bond yields, which can make lending activity more profitable.
That has particularly helped J.P. Morgan, the largest bank in the nation by both assets and market value. Since the presidential election, bond yields have risen and the gap between long- and short-dated debt has widened. That should help banks' income because it increases the difference between what lenders charge on loans and pay out on deposits.
President-elect Donald Trump has also made comments about infrastructure projects to boost the economy. Banks and Wall Street firms such as Goldman Sachs are likely to be in the middle of these plans, either as advisers or lenders. Goldman, which derives more of its revenue from advising companies and trading their securities, also stands to benefit from increased volatility in recent weeks and widespread debate about the future of the global economy. Both factors increase investors' appetite to trade, which helps the firms' massive bond and stock-trading desks. Investors are also betting on reduced regulatory and tax costs under a Trump administration, which should help banks. Many of the prospective appointees for key economic posts in a Trump administration either have worked on Wall Street or have expressed sympathy with the idea that banks have been too heavily regulated.
Analysts at Credit Suisse expect earnings per share in 2017 could beat their pre-election base case forecast by 24% at Goldman and 30% at J.P. Morgan. However, it is an improvement from low expectations and conditions are still far from ideal for the big U.S. banks. For example, while there have been recent signs of health -- notably increased trading volumes -- long-term interest rates are still lower than they were a year ago and the so-called yield curve is slightly flatter -- which means interest income will likely remain under pressure.
UnitedHealth Group Inc. (99.64 points)
The largest U.S. health insurer has struggled to eke out profitability from its Affordable Care Act plans. UnitedHealth Group has said it intends to withdraw from nearly all of the health-law marketplaces next year amid anticipated annual losses of about $850 million on ACA plans. Other insurers have also pulled back from their coverage areas under the law, leaving many counties with only one participating insurer and increased premiums. President-elect Donald Trump has pledged to "repeal and replace" the Affordable Care Act. Still, the law has also resulted in a Medicaid expansion, bringing new customers to the insurer. In its latest quarter, the company added 9% more Medicaid members. UnitedHealth also said medical spending was in line with its expectations, reassuring investors. The company has increasingly relied on its health-services unit, Optum, to drive growth. Optum is rapidly expanding its primary-care business and the unit, which also has analytics and pharmacy services divisions, is a differentiator for UnitedHealth compared with other insurers. In its latest quarter, revenue grew 12% to $46.29 billion.
Caterpillar Inc. (77.45 points)
The manufacturing giant has faced a tougher second half of the year than executives were expecting amid persistent weak demand for its construction, mining and oil equipment around the world. Revenue fell 16% in its latest quarter, and the company in October predicted another tough year in 2017 as the company deals with the fallout from the global commodities bust and prepares for a transition in top leadership. Caterpillar, whose sales hit an all-time high in 2012 under Chairman and Chief Executive Doug Oberhelman, has struggled since his move to drive the company deeper into mining equipment by pouring billions of dollars into factories. The move backfired when miners began shelving equipment-buying plans as commodity prices fell. Mr. Oberhelman will retire next year, earlier than expected, leaving company veteran Jim Umpleby to battle a historic sales slump after ill-timed bets on China and mining equipment.