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Avoid health-care stocks as D.C. spins its wheels? No, here's a case for buying them
MARKETWATCH 9:27 AM ET 7/21/2017
Critical information for the U.S. trading day

Much of the chattering today comes courtesy of the Russia-related shuffles in Washington (http://www.marketwatch.com/ story/trump-reshuffles-legal-team-kasowitz-out-reports-2017-07-20) and the big strikeout on health care (https:// www.wsj.com/articles/trump-obamacare-and-the-art-of-the-fail-1500592022). But how much are stocks actually reacting to those headlines?

Well, the S&P is staying on track for its third up week in a row. A "reasonably solid corporate outlook" is helping offset political worries and those apparently increasingly hawkish central bankers, suggests Value Line's Adam Rosner (http://www.valueline.com/Markets/Daily_Updates/Stock_Market_Today__July_20,_2017.aspx#.WXG4AYTyuHs).

In fact, nobody at all really cares about those Russian intrigues, going by the chart below from Ricochet's Jon Gabriel (https://ricochet.com/442941/americans-care-vs-media-cares/).

But health care (XLV) is of great interest, it seems. So we'll award call of the day honors to a Schwab expert's take on that sector and its uncertain future.

While the most recent effort to repeal and replace Obamacare has now been shelved, it's likely we'll see some changes to the health-care system eventually, according to Brad Sorensen, the Schwab Center for Financial Research's director of market and sector analysis.

"This will likely keep the health-care sector a bit more volatile than usual, but also create some opportunities for investors willing to ride the potential roller coaster," he writes.

Sorensen sees a lot of positives: Valuations appear fair to slightly below average, balance sheets are solid, the stocks sport good dividend yields, the sector's overall cost structure has improved, and demand is rising, thanks to graying populations.

Oh, and the sector has outperformed during Federal Reserve hiking cycles since 1970. Just stick with it when the going gets tough in the coming months, Sorensen suggests.

"At times it will feel disappointing, as the sector experiences short-term dips on speculation as to what changes may or may not occur," he says. "We urge investors to remain patient."

The Schwab expert has an outperform or buy rating for health care. He also especially likes financials and tech, but warns that real estate, telecoms and utilities will underperform in this year's second half.

Go here (http://www.schwab.com/public/schwab/nn/articles/Healthcare-sector) for Sorensen's latest take on health care -- and here (http://www.schwab.com/public/schwab/nn/articles/Sector-Views) for his overview for all sectors.

Key market gauges

Futures for the Dow , S&P 500 and Nasdaq-100 are dipping. The Dow is flirting with a decline for this record- setting (http://www.marketwatch.com/story/tech-stocks-on-track-to-set-another-record-even-as-sp-futures-struggle-2017- 07-19) week, but the S&P and Nasdaq Composite are on pace for weekly gains.

The dollar is pulling back, as the euro keeps rising (nobody told it that ECB boss Mario Draghi was dovish yesterday (http://www.marketwatch.com/story/nobody-told-the-euro-that-mario-draghi-was-dovish-2017-07-20)). Bitcoin is lower after yesterday's surge (http://www.marketwatch.com/story/bitcoin-surges-18-as-rebound-continues-after-fall-from-june- high-2017-07-20), as the cryptocurrency's network moves closer to changing its structure (http://www.coindesk.com/bip- 91-locks-means-bitcoin-not-scaled-yet/) to accommodate more transactions.

See the Market Snapshot column (http://www.marketwatch.com/story/nasdaq-win-streak-in-doubt-as-stock-futures-limp- ahead-of-ge-honeywell-2017-07-21) for the latest action.

The chart

Traders will be watching to see if Home Depot (HD) and Lowe's (LOW) can bounce back from their selloff yesterday (http://www.marketwatch.com/story/home-depots-biggest-stock-price-plunge-in-17-years-shaves-75-billion-off-market-cap- 2017-07-20).

Their drop came amid fears over an "Amazon effect" as Sears (SHLD)launched the sale (http://www.marketwatch.com/story/ sears-to-sell-kenmore-brand-on-amazon-2017-07-20-12485539) of Kenmore appliances through the e-commerce juggernaut's website.

The slump for Home Depot and Lowe's -- often said to be "Amazon-proof" -- may not have been an overreaction, writes Charlie Bilello, research director at Pension Partners, in a brief tweetstorm that features the chart above.

Given the two home-improvement retailers trade at 22 times earnings or higher, "there is plenty of room for investors to question their 'Amazon-proof' status," Bilello says (https://twitter.com/charliebilello/status/888243657022861312).

Amazon's threat to Costco (COST) was also said to be an overreaction, he notes, but the warehouse club's stock "has since continued lower."

Read more:Attention, shoppers: 'Amazon effect' is creating bargain stocks (http://www.marketwatch.com/story/attention- shoppers-amazon-effect-is-creating-bargain-stocks-2017-07-19)

Amazon (AMZN) is also in the headlines because of allegations of deceptive discounting (http://www.reuters.com/ article/us-whole-foods-m-a-amazon-ftc-idUSKBN1A52R5?utm_campaign=trueAnthem:+Trending+Content&utm_content= 59711aff04d3014e125921b3&utm_medium=trueAnthem&utm_source=twitter) -- and for buying products from some retailers at full price to build its global inventory (http://www.cnbc.com/2017/07/20/amazon-new-fba-program-buys-products-from-u-s- retailers-at-full-price.html).

The buzz

Microsoft (http://www.marketwatch.com/story/microsoft-rises-to-record-levels-after-earnings-beat-2017-07-20)(MSFT) and Visa (http://www.marketwatch.com/story/visa-shares-tick-higher-after-earnings-top-street-estimate-2017-07-20)(V) look set for up days after their earnings late yesterday, while eBay (EBAY) is trading lower premarket following its report (http://www.marketwatch.com/story/ebay-lower-as-q2-earnings-sales-in-line-with-forecast-2017-07-20).

See:Microsoft rides tax benefit from failing at smartphones to earnings beat (http://www.marketwatch.com/story/ microsoft-rides-huge-tax-benefit-from-failing-at-smartphones-to-big-earnings-beat-2017-07-20)

GE (http://www.marketwatch.com/story/ges-stock-turns-sharply-lower-after-ceo-immelt-gives-downbeat-outlook-on- conference-call-2017-07-21)(GE) , Honeywell (http://www.marketwatch.com/story/honeywell-tops-sales-and-profit-estimates- raises-full-year-sales-outlook-2017-07-21)(HON) , Colgate-Palmolive (http://www.marketwatch.com/story/colgate- palmolives-stock-drops-after-sales-miss-offsets-in-line-profit-2017-07-21)(CL) and Schlumberger (http:// www.marketwatch.com/story/schlumberger-earnings-top-estimates-sees-robust-north-american-market-in-second-half-2017-07- 21)(SLB) posted results before the open.

How do you say "oops" in German? Munich-based Siemens (SIE.XE) said it will quit a joint venture (http:// www.marketwatch.com/story/siemens-to-quit-russian-jv-after-turbines-diverted-to-crimea-report-2017-07-21) with a Russian power plant after it discovered four gas turbines destined for Russia were instead diverted to Crimea, violating European Union sanctions.

A highly-anticipated meeting of oil ministers from the Organization of the Petroleum Exporting Countries and some non- OPEC producers on Monday could make or break (http://www.marketwatch.com/story/how-opec-committees-coming-meeting-could- make-or-break-oil-prices-2017-07-20) oil prices.

More deal news for payments processors: Paysafe (PAYS.LN)has received a takeover offer (http://www.telegraph.co.uk/ business/2017/07/21/online-payments-company-paysafe-receives-29bn-approach-blackstone/) worth about $3.8 billion.

It's looking light in terms of U.S. economic data, with just the usual tally for North American oil rigs due around halftime today.

Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)

The quote

"We do not know what he means when he says he received 'verbal government approval.' There are numerous hurdles for this unproven 'hyperloop' technology before it can become reality." -- Mike Dunn, spokesman for the City of Philadelphia, is among the East Coast government officials (https://www.theguardian.com/technology/2017/jul/20/elon- musk-hyperloop-verbal-government-approval?CMP=share_btn_tw) saying "Well, actually..." to Elon Musk.

That's after the entrepreneur behind Tesla (TSLA) and other ventures said he had an OK (http://www.marketwatch.com/ story/elon-musk-says-he-has-approval-to-build-tunnel-that-would-cut-nyc-to-dc-commute-to-29-minutes-2017-07-20) to build a tunnel that would let people travel from New York to Washington, D.C., in 29 minutes.

Check out:How Elon Musk and shorter commutes could transform people's lives (http://www.marketwatch.com/story/how- elon-musk-and-shorter-commutes-could-transform-peoples-lives-2017-07-20)

The stat

3.9% -- That was how much North Korea's GDP grew last year, according to South Korea's central bank.

The isolated nation's economy expanded at its fastest rate in 17 years despite international sanctions aimed at curbing its defiant pursuit of nuclear weapons, a Reuters report (http://www.cnbc.com/2017/07/20/north-koreas-economic- growth-climbs-to-17-year-high-in-2016-despite-sanctions-targeting-nuclear-program.html)notes.

Random reads

An Army veteran in Ohio can keep his therapeutic ducks (http://www.foxnews.com/us/2017/07/21/ohio-veteran-can-keep- ducks-to-relieve-ptsd-depression.html).

Surreal: Salvador Dali's body has now been exhumed (http://edition.cnn.com/2017/07/21/arts/spain-salvador-dali- exhumation/index.html) for a paternity test.

NASA lost track of this bag of moon dust (http://www.npr.org/sections/thetwo-way/2017/07/20/538300098/moon-dust-bag- accidentally-in-private-hands-to-be-auctioned-off-today). It was auctioned for $1.5 million.

A coffee containing an ingredient similar to Viagra has been recalled (https://www.forbes.com/sites/robertglatter/ 2017/07/21/viagra-in-your-coffee-fda-recalls-latest-combo-product/#7d6003932503).

Malaysia has banned (http://money.cnn.com/2017/07/20/media/malaysia-ban-despacito-state-media/index.html?sr= twCNN072117malaysia-ban-despacito-state-media1130AMStory) the hit song "Despacito" from state radio and TV.

Poland is set to revamp its judiciary (https://www.bloomberg.com/news/articles/2017-07-21/polish-lawmakers-to-push-on- with-court-revamp-despite-protests), defying allies and protesters.

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-Victor Reklaitis; 415-439-6400; [e-mail]


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07-21-170927ET
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