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Stock Market News: Walmart Stokes US Growth; Goldman Heads to Main Street

By Dan Caplinger – May 16, 2019 at 11:51AM

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Markets were sharply higher on positive economic news.

The stock market did well on Thursday morning, as investors largely reacted favorably to news on the economic front. A decline in unemployment claims assured market participants that the U.S. economy remains strong, and solid earnings from high-profile companies helped investors overcome trade fears. As of 11:30 a.m. EDT, the Dow Jones Industrial Average (^DJI 1.88%) was up 264 points to 25,912. The S&P 500 (^GSPC 1.97%) soared 36 points to 2,887, and the Nasdaq Composite (^IXIC 0.00%) was higher by 106 points to 7,928.

Among the biggest companies reporting their latest results was retail giant Walmart (WMT 1.65%), which many were watching closely amid concerns that e-commerce would eat into its long-term prospects. Meanwhile, Wall Street titan Goldman Sachs (GS 3.23%) made a strategic move that'll shift more of its emphasis toward Main Street retail investors -- a trend that's been gaining speed recently in the financial community.

Walmart starts 2019 strong

Shares of Walmart rose 3% after the big-box retail behemoth reported its first-quarter financial results. From an overall standpoint, Walmart's numbers were mixed. Overall sales were up just 1% worldwide, and adjusted earnings of $1.13 per share were actually down by $0.01 per share from year-ago levels.

Three people walking across a parking lot in front of a Walmart store, with some cars nearby.

Image source: Walmart.

However, Walmart overcame some challenges to produce those numbers. Currency-related issues cost the company about 1.5 percentage points of growth, or close to $2 billion off its top line. Although reported international revenue was down 5%, it would've been up 1% on a currency neutral basis. On the bottom line, Walmart took a $0.20-per-share hit because of its equity investment in China's JD.com, which has been under pressure lately.

What made Walmart investors happiest was the success the retail giant had in the U.S. market. Comparable-sales growth of 3.4% domestically marked the best beginning to a year since 2010, and operating income rose more sharply than anticipated. Moreover, efforts to bolster Walmart's e-commerce business bore fruit, as strength in online grocery as well as home and fashion goods helped lead to a 37% rise in sales from online business.

Walmart's overall strategy has been to tout its benefits to customers of its namesake stores without charging an up-front membership fee, which sets it apart from both big-box warehouse specialist Costco and e-commerce rival Amazon.com. The battle for retail will continue, but Walmart has taken the right steps to ensure its ability to grow in the same direction that consumers want to see in the years to come.

Goldman goes downscale

Meanwhile, Goldman Sachs saw its shares gain 1% following news that it will purchase United Capital Financial Partners for $750 million. The cash acquisition of the registered investment advisor will bring about $25 billion in assets under management under Goldman's corporate umbrella.

By itself, that news might not seem surprising. But for a Wall Street-focused company like Goldman, turning to United Capital is a move to diversify its investment business. United Capital's reach extends across more than 90 offices in the U.S., serving 22,000 clients with more than 220 financial advisors. The company also has a platform to help advisors interact more efficiently with clients.

Goldman CEO David Solomon explained the move. To him, Goldman's wealth management divisions "will serve as the cornerstone of our business as we execute on our long-term strategy to offer clients solutions across the wealth spectrum." As Solomon sees it, "United Capital will help accelerate this strategy by broadening our reach, allowing more clients to access the intellectual capital and investment capabilities of Goldman Sachs."

Goldman already made a big move into retail banking through its Marcus consumer platform, and the latest move will bring similar exposure to investments. Goldman might not be a favorite on Main Street, but it's looking to offer its services to ordinary investors in order to remain a giant of the industry.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AMZN and JD. The Motley Fool recommends COST. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
GS
$300.79 (3.23%) $9.41
Walmart Stock Quote
Walmart
WMT
$133.11 (1.65%) $2.16
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$29,683.74 (1.88%) $548.75
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,719.04 (1.97%) $71.75
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$10,829.50 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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