Stocks opened higher this morning. The Dow is current up 55 pts and the SPX is up .12%. Sectors are responding to earnings announcements (see below) and interest rates. Rate sensitive sectors like real estate and utilities are down between .8% and 1.8% in early trading. The banks are up 1%. The VIX is down and commodities are up. Bonds are trading lower. The 10-year Treasury yield jumped to 2.59%. In other words, today’s session fits a risk-on template.

Johnson & Johnson (JNJ) reported first quarter results that beat Wall Street projections, and its own forecasts. Revenue was flat with year-ago levels and earnings-per-share rose 2%. That doesn’t sound like much, but remember that management really guided lower during its last quarterly call with investors. Operating revenue rose 3.9%, whereas management had guided to zero growth. It turns out JNJ’s pharmaceutical business grew 4.1%, much faster than expected. On the other hand, consumer products sales fell 2.4% and medical device sales fell 4.6%. My sense is that investors will view this report as a modest positive. The stock is up 1.8% today.

Blackrock (BLK) reported revenue in line with analysts’ consensus forecast, while beating earnings expectations. Management cited asset inflows of $65bil during the quarter—the highest since 2017. This is good news for a company that really struggled in the face of last year’s market melt-down. CEO Larry Fink said clients have been moving out of cash and into fixed income, partly because the Federal Reserve signaled its intent to go easy on monetary tightening. Unfortunately, clients continued pulling money out of equity funds during the first quarter, but that should turn around if the stock market continues to move higher. The stock is up 2.5% today.

United Healthcare (UNH) CEO David Wichmann responded to a new bill in the US Senate dubbed “Medicare For All” with a warning: it will “destabilize the nation’s health system.” Senator Bernie Sanders, known for his socialist agenda, introduced a bill that would create a government-run healthcare insurance system. The system would effectively end private health insurance. Eliminating co-pays and deductibles and making coverage universal, the plan would be paid for (in part) by higher income tax rates for the wealthy, higher estate tax, and a “fee on large financial institutions.” Incredibly, Senator Sanders claims a government structure could manage healthcare more efficiently than a corporate structure. Mr. Wichmann says that the “inherent cost burden would surely have a severe impact on the economy and jobs—all without fundamentally increasing access to care.”

Credit Suisse Chief Equity Strategist Jonathan Golub says investment risks are waning. The economy isn’t falling apart and recession risks are down. Just as important, “This discussion of earnings recession is going to be off the table once we get into earnings season.” Earnings recessions are generally defined as two consecutive quarters of declining corporate earnings. Over the past six months Wall Street analysts have busily reduced 2019 earnings estimates due to slowing global economic growth, the trade war with China, etc. Consensus projections are for flat to slightly negative growth in the first and second quarters of this year. But Mr. Golub believes that actual results will be better than that. Blackrock’s CEO Larry Fink agrees, saying the bigger risk is for a “melt-up” rather than a melt-down in the market.

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