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Dow 30 Stock Roundup: JPMorgan Beats, P&G Hikes Dividend, Boeing Secures $992.63M Army Contract

The Dow moved upward this week following an increase in oil prices and gains in financial stocks. The index declined on Monday following losses in healthcare and consumer staples stocks. The index rebounded on Tuesday to register its best intra-day gain in terms of points as well as percentage gains since Mar 11. The index finished in the green for the second consecutive day on Wednesday following a rally in financial stocks. The index managed to eke out a meager 0.1% gain on Thursday as gains in financial stocks continued to boost investor sentiment. The Dow has gained 1.5% over the first four trading days of the week.

Last Week’s Performance

The index increased 0.2% last Friday as strong gains in oil prices, which had a positive impact on energy stocks, helped offset losses in consumer discretionary and healthcare stocks. Decline in the U.S. oil rig count and news on a decline in production in Russia played major roles in boosting crude.

Baker Hughes BHI reported that the U.S. oil rig count declined from 362 to 354, posting the third straight weekly decline. Moreover, Russia reported that its crude production has fallen in April. Chevron Corp CVX and Exxon Mobil Corporation XOM, which advanced 1.6% and 1%, respectively, emerged as the leading gainers among the Dow components.

Meanwhile, in a discussion with former Fed Chiefs, Fed Chair Janet Yellen said that the U.S. economy is “on a solid course,” and “a gradual path of rate increases will be appropriate.” Separately, wholesale inventories declined at the sharpest rate of 0.5% in February since May 2013, witnessing the fifth consecutive monthly decline. It was also wider than the consensus estimate of a 0.2% fall.

Despite Friday’s gain, the Dow posted its worst weekly decline since Feb 12, declining 1.2%. Among major factors, weak output and services data out of Europe and Japan, and disappointing economic data including decline in new orders and expansion in trade deficit led to declines in key U.S. indexes. Moreover, a disappointing first quarter earnings outlook and release of the minutes of Federal Reserve’s March two-day policy meeting, which showed the Fed officials shared diverse views regarding rate hike chances, also dampened investor sentiment.

The Dow This Week

The index decreased 0.1% on Monday following losses in healthcare and consumer staples stocks. Concerns over a gloomy first quarter earnings season dragged down investor sentiment. First quarter estimates fell sharply over the last three months and are continuing to come down.

Moreover, a cautious approach from investors led the Health Care Select Sector SPDR ETF (XLV) to fall 0.8%, the biggest decliner among the S&P 500 sectors. The iShares Nasdaq Biotechnology ETF (IBB) also declined 1.7%. Additionally, the Consumer Staples Select Sector SPDR ETF (XLP) slumped 0.7% and was the second biggest decliner among the S&P 500 sectors.

However, the Energy Information Administration (EIA) forecast that oil production in seven major shale-drilling regions in the U.S. may decline in May. This helped WTI crude to rise 1.6% to $40.36 per barrel, the first rise in prices above the $40 per barrel level since March 22. Also, fall in the U.S. dollar against a basket of currencies boosted oil prices.

The Dow rebounded on Tuesday to register its best intra-day gain in terms of points as well as percentage gains since Mar 11. The index gained 0.9% following a rally in oil prices and strong gains in financial stocks. Oil prices increased on hopes that two key oil exporting nations, Russia and Saudi Arabia, may opt to freeze their crude output level. WTI crude reached its highest settlement since late Nov 2015.

Further, an oil surge boosted financial and bank stocks as they reduced worries over the possibility of oil loan defaults. Meanwhile, Alcoa Inc. AA officially kicked off the first quarter earnings season by reporting earnings per share of 7 cents, down from 28 cents per share recorded a year ago. Shares of Alcoa fell 2.7% following its earnings release.

The index finished in the green for the second consecutive day on Wednesday, gaining 1.1% following a rally in financial stocks, mainly driven by better-than-expected earnings results from JPMorgan Chase & Co. JPM.

Moreover, China’s encouraging trade data boosted investor sentiment. The country’s exports increased 11.5% in March, registering the first monthly rise in nine months. Imports last month declined by 7.6%, narrower than a 13.8% fall in February. On the domestic front, the Fed’s Beige Book showed that economic activity improved in most districts of the U.S.

However, oil prices slumped on Wednesday after the EIA reported that U.S. commercial crude oil inventories rose 6.6 million barrels to 536.5 million for the week ended April 8, compared to an increase of 6.2 million barrels reported by the American Petroleum Institute (API) a day earlier. Separately, retail sales fell 0.3% last month, in contrast to the consensus estimate of a 0.1% rise. PPI for finished goods decreased 0.1% in March, declining for the sixth time in the last eight months.

The Dow managed to eke out a meager 0.1% gain on Thursday as gains in financial stocks continued to boost investor sentiment. Shares of Bank of America Corporation BAC increased 2.5% after a decline in the bank’s expenses and an increase in loan volume during the first quarter.

Further, the U.S Department of Labor reported that seasonally adjusted initial claims decreased 13,000 to 253,000 in the week ending Apr 9, falling to its lowest level since 1973. Initial claims were less than the consensus estimate of 269,000.

Meanwhile, oil price fell yesterday after IEA reported that any production freeze deal in the Doha meeting might not “impact the global supply-demand balance.” IEA also said that “if there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited." The Labor Department reported that Consumer Price Index (CPI) increased 0.1% in March, lower than the consensus estimate of 0.2%. Core-CPI gained 0.1% last month, lower than the consensus estimate of 0.2%.

Components Movingthe Index

JPMorgan Chase’s first-quarter 2016 earnings of $1.35 per share surpassed the Zacks Consensus Estimate of $1.26. However, the figure declined 7% from the year-ago period. Managed net revenue of $24.1 billion in the quarter was down 3% from the year-ago quarter. However, it compared favorably with the Zacks Consensus Estimate of $23.9 billion.

Non-interest expense came in at $13.8 billion, 7% lower than the year-ago quarter. As of Mar 31, 2016, nonperforming assets were $8 billion, up 4% from $7.7 billion a year ago. Net charge-offs increased 6% year over year to $1.1 billion. Further, provision for credit losses increased 90% year over year to $1.8 billion primarily owing to increases in wholesale reserves versus reserve releases in the year-ago quarter.

The Procter & Gamble Company PG announced a 1% hike in the quarterly dividend, marking its 60th consecutive year of dividend increase. Last year, the consumer giant offered a 3% dividend hike.

The quarterly dividend was raised from 66.29 cents to 66.95 cents per common share. The quarterly dividend will translate into $2.69 annually which will yield 3.2%. The new quarterly dividend will be payable on or after May 16, 2016, to common stockholders of record on close of business as on Apr 18.

The Boeing Company BA announced that it received a modification contract worth nearly $992.63 million from the Army Contracting Command, Redstone Arsenal, AL. Per the contract, Boeing will do some modification work on 117 AH-64E remanufactured Apache helicopters.

These advanced helicopters also require upgrades to serve the ever changing needs of the Army. The block upgrades of AH-64E helicopters will keep them ready for future missions. Boeing has delivered 7 new and 11 remanufactured Apache helicopters to defense customers during the first quarter of 2016.

ExxonMobil Corporation announced that R.W. Tillerson, its Chairman and CEO, has received total compensation worth $27.30 million for 2015. This reflects a year-over-year decline of nearly 18%.

Per the company’s regulatory filing, Tillerson received a total compensation of $27.30 million. This is much lower than $33.10 million received in 2014 and $28.14 million in 2013.

The total compensation of the CEO includes a base salary of $3.05 million, stock grants worth $18.29 million as well as a bonus of $2.39 million. Notably, the bonus and stock grants declined significantly from $3.67 million and $21.42 million in 2014, respectively. However, Tillerson’s base salary increased in comparison to $2.87 million received in 2014.

The Goldman Sachs Group, Inc. GS has acknowledged several facts regarding how the Wall Street giant made “false and misleading representations” to potential investors about the quality of loans it securitized and also the manner in which it safeguarded the investors in its residential mortgage-backed securities (RMBS). The acceptance formed a part of the previously disclosed $5.1 billion settlement which was finalized on Monday.

The U.S. Department of Justice mentioned in its release that investors incurred billions of dollars in losses as a result of investment in the RMBS issued and underwritten by Goldman in the period between 2005 and 2007.

Wal-Mart Stores Inc. WMT reportedly expanded its free curbside pickup of groceries. The company will widen its footprint to eight cities including Kansas City and Austin this April. Including these new cities, Wal-Mart’s free grocery pick-up service — launched last September — will be available in 30 cities across the nation. In cities where it already has stores, the retail giant will increase its store count offering the service by a third to about 200.

Using Wal-Mart’s new service, customers can shop online and choose a convenient time to pick up the groceries at their local store. Store employees would help customers to load the groceries at the designated parking area.

Performance of the Top 10 Dow Companies

The table given below shows the price movements of the 10 largest components of the Dow, which is a price weighted index, over the last five days and during the last six months. Over the last five trading days, the Dow has increased by 1.6%.

Ticker

Last 5 Day’s Performance

6-Month Performance

MMM

+0.4%

+12.7%

GS

+6%

-13%

IBM

+1.1%

+0.7%

HD

-0.5%

+10.3%

BA

+2.3%

-4.8%

UNH

+0.6%

+6.5%

MCD

-0.8%

+23%

TRV

+0.1%

+9.9%

JNJ

+0.2%

+13.1%

MMM

+0.4%

+12.7%

Next Week’s Outlook

Impressive results from bellwether stocks and rising oil prices have resulted in substantial gains for financial stocks this week. This category has been the primary driver of the week’s market gains. On the other hand, economic data has been mixed with a decline in retail sales and PPI.

On the other hand, the Fed’s Beige Book has reported an increase across the regions it surveyed. It is likely that crude prices will continue to guide markets in the days ahead. Quarterly results, especially those from big names, will continue to have a major impact on market proceedings. However, several key reports are scheduled for release in the days ahead. This includes data on industrial production, housing and leading indicators. Positive news on this front will help stocks continue to move upward in the days ahead.

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JPMORGAN CHASE (JPM): Free Stock Analysis Report
 
BANK OF AMER CP (BAC): Free Stock Analysis Report
 
BOEING CO (BA): Free Stock Analysis Report
 
GOLDMAN SACHS (GS): Free Stock Analysis Report
 
ALCOA INC (AA): Free Stock Analysis Report
 
BAKER-HUGHES (BHI): Free Stock Analysis Report
 
CHEVRON CORP (CVX): Free Stock Analysis Report
 
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
 
WAL-MART STORES (WMT): Free Stock Analysis Report
 
PROCTER & GAMBL (PG): Free Stock Analysis Report
 
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