The Dow experienced a volatile week, guided once again by oil prices and earnings results. The index moved lower on Monday following a decline in crude prices after the oil ministry of Iraq said that the country has produced a record volume of oil last month. The index gained on Tuesday following a rebound in oil prices on indications that oil exporting countries would act to reduce the supply glut.
The index declined on Wednesday after the Fed failed to provide clear indications about whether it would implement a rate hike in March. The Dow moved upward on Thursday after oil prices gained considerably. The Dow has declined over the first four trading days, losing 0.2%.
Last Week’s Performance
The index gained 1.3% last Friday after crude prices increased for the second consecutive day, sending energy stocks higher. Gains were triggered by a Baker Hughes BHI report which said U.S. rig count had declined. Dow components Exxon Mobil Corp XOM and Chevron Corp CVX advanced 3.3% and 3.1%, respectively.
Additionally, ECB President Mario Draghi indicated on Thursday that additional monetary stimulus would be provided to the Eurozone. Bank of Japan is also likely to introduce more stimulus measures following higher risks from a stronger yen and volatile oil price movement. On the domestic front, existing home sales came in above estimates while leading indicators declined last month.
In earnings news, shares of General Electric Company GE declined 1.2% after reporting fourth quarter operating earnings of $3.0 billion or 31 cents a share, down from $3.9 billion or 39 cents per share reported in the year-ago quarter.
American Express Co. AXP reported an 11.5% year-over-year decline in fourth-quarter earnings per share (EPS), primarily due to the strong appreciation of the U.S. dollar and an increase in expenses. Shares of American Express declined 12.1%.
The index advanced 0.7% over last week. Markets ended the week with healthy gains on the back of strong recovery in oil prices and hopes of more aggressive economic stimulus measures in major economies including China, Eurozone and Japan. Certain encouraging earnings reports also had a positive impact on stocks.
The Dow This Week
The index lost 1.3% on Monday following a decline in crude prices after the oil ministry of Iraq said that the country has produced a record volume of oil last month. This development heightened concerns about oversupply of oil. High production in central and southern regions helped Iraq to post oil output of 4.13 million barrels per day in December. Further, it is expected that Iraq’s oil output may increase well above 4 million barrels per day this year.
Additionally, expectations that gasoline and oil demand would decline due to the blizzard hitting US’s East Coast also affected investor sentiment. This in turn reduced volume of traffic which is likely to weigh on fuel demand. Exxon Mobil and Chevron declined 3.4% and 3.2%, respectively.
Shares of Caterpillar Inc. CAT declined 5.1% following a downward revision of its rating and was the poorest performer among the Dow components. Shares of McDonald’s Corporation MCD increased 0.7% following strong earnings results.
The index added 1.8% on Tuesday following a rebound in oil prices. Indications that oil exporting nations are set to reduce the rising supply glut powered a rise in crude. Major oil producing nations are likely to enter into a deal to limit their overall oil output. Iraq’s oil minister said that both Russia and Saudi Arabia have shown interest in reducing the supply glut.
Strong gains from 3M Company MMM also pushed the Dow upward. Shares of 3M increased 5% after earnings beat estimates. The Procter & Gamble Company’s PG shares gained 2.6% after coming in ahead of estimates. Johnson & Johnson JNJ also beat estimates and its shares gained nearly 5%.
Investors were disheartened on Wednesday after the Fed failed to provide clear indications about whether it would implement a rate hike in March. The index declined 1.4% even as the central bank kept the interest rate unchanged. The central bank’s hawkish statement regarding the financial and economic scenario dampened investor sentiment.
Additionally, dismal earnings numbers from Apple and The Boeing Company BA also dragged down the Dow. Shares of Apple plunged 6.6% to $93.42, its lowest close since Jan 28, 2014, following a discouraging earnings report. Boeing’s shares slumped 8.9% to $116.58, its lowest close in the last 5 years.
The Dow increased 0.8% on Thursday after oil prices gained considerably. Prices of crude moved upward in intraday trading to its highest level year to date. Expectations that Russia and the OPEC would work together to reduce crude production powered the price rise. Russia’s energy minister Alexander Novak said that Saudi Arabia has proposed a 5% production cut.
Exxon Mobil and Chevron advanced 2.3% and 3.2%, respectively. Encouraging results from Facebook, Inc. FB also boosted the broader markets. Shares of Facebook surged 15.5%. Pending homes sales increased marginally while durable orders nosedived in December.
Components Moving the Index
Apple reported fiscal first quarter 2016 earnings of $3.28 per share, 7.2% higher than the year-ago figure. This was also higher than the Zacks Consensus Estimate of $3.24. Revenues of $75.9 billion missed the Zacks Consensus Estimate of $76.4 billion but increased 1.7% over the year-ago quarter.
Revenues were near the lower end of the guided range of $75.5 billion to $77.5 billion. For the second quarter of fiscal 2016, Apple forecasts revenues in the range of $50 billion and $53 billion. The Zacks Consensus Estimate for the same is pegged at $55.4 billion.
3M reported fourth quarter earnings of $1.80 per share, higher than the Zacks Consensus Estimate of $1.62. Net sales during the quarter were $7,298 million, down 5.4% year over year but ahead of the Zacks Consensus Estimate of $7,211 million.
For 2015, the company reported GAAP earnings of $4,833 million or $7.58 per share compared with $4,956 million or $7.49 per share in 2014. Excluding restructuring charges, adjusted earnings for 2015 were $7.72 per share which exceeded the Zacks Consensus Estimate of $7.55.
Boeing’s fourth quarter adjusted earnings of $1.60 per share easily beat the Zacks Consensus Estimate of $1.25 by 28%. However, earnings plunged 30.7% from $2.31 per share a year ago, owing to the previously announced $569 million after-tax charge on the 747 program.
The company's revenues suffered a 4% yearly decline, ending at $23.57 billion. However, this came in ahead of the Zacks Consensus Estimate of $23.39 billion.
The aircraft maker’s 2015 non-GAAP earnings came in at $7.72 per share, surpassing the Zacks Consensus Estimate of $7.35 but decreasing 10% year over year. On a GAAP basis, earnings were $7.44 per share, up 1% year over year.
Caterpillar’s fourth-quarter 2015 adjusted earnings declined 45% to 74 cents per share, reflecting weakening economic growth primarily in developing countries, and ongoing weakness in mining and oil and gas industries. Earnings, however, managed to beat the Zacks Consensus Estimate of 69 cents.
Revenues declined 23% year over year to $11.03 billion in the quarter, failing to match the Zacks Consensus Estimate of $11.277 billion due to unfavorable currency impact along with lower volumes.
Johnson & Johnson’s fourth-quarter 2015 earnings came in at $1.44 per share, beating the Zacks Consensus Estimate of $1.42 per share and increasing 5.1% from the year-ago period.
However, fourth quarter sales of $17.8 billion fell short of the Zacks Consensus Estimate of $17.9 billion, and declined 2.4% from the year-ago period. While operational results increased 4.4%, currency fluctuations had a negative impact of 6.8%.
Procter & Gamble’s second-quarter adjusted earnings of $1.04 per share beat the Zacks Consensus Estimate of 98 cents by 6.1%. Additionally, earnings increased 9% year over year despite currency headwinds of 12%.
P&G’s net sales declined 9% to $16.92 billion as steep currency headwinds hurt sales significantly, thereby lowering the value of international sales. The top line also missed the Zacks Consensus Estimate of $16.96 billion by a narrow margin.
McDonald’s posted earnings per share of $1.31 that beat the Zacks Consensus Estimate of $1.23 by 6.5%. Including the foreign exchange impact, earnings increased 16% year over year.
Revenues of $6.34 billion declined 4% year over year, mainly due to currency headwinds. However, revenues increased 5% in constant currencies on a yearly basis driven by comps growth in all the segments. This also exceeded the Zacks Consensus Estimate of $6.24 billion by 1.6%.
DuPont’s DD adjusted earnings of 27 cents per share beat the Zacks Consensus Estimate of 26 cents. This exceeded the figure of 57 cents per share registered a year ago. DuPont garnered net sales of $5,299 million for the quarter, a roughly 9% year-over-year decline. Sales also came in lower than the Zacks Consensus Estimate of $5,409 million.
For the full year, revenues were $25,130 million, down around 12% year over year. DuPont expects operating earnings of $2.95 to $3.10 per share for 2016. The forecast fell short of the current Zacks Consensus Estimate of $3.14.
United Technologies Corporation UTX reported fourth-quarter 2015 adjusted net income of $1,298 million or $1.53 per share, down from $1,516 million or $1.67 per share in the year-ago quarter. However, adjusted earnings for the reported quarter beat the Zacks Consensus Estimate by a couple of cents.
Adjusted consolidated net sales for the fourth quarter declined 2.2% year over year to $14,652 million. Revenues also missed the Zacks Consensus Estimate of $15,425 million.
For 2015, adjusted earnings exceeded the Zacks Consensus Estimate by a couple of cents. For 2015, United Technologies reported adjusted consolidated net sales of $56,450 million compared with $57,900 million in 2014. Despite a soft economic scenario across the globe, United Technologies reaffirmed its 2016 guidance.
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 gained 0.5%.
|
Ticker |
Last 5 Day’s Performance |
6-Month Performance |
|
GS |
+0.9% |
-23.4% |
|
MMM |
+6.2% |
-2.5% |
|
IBM |
-6% |
-23.6% |
|
BA |
-6.1% |
-16.8% |
|
AAPL |
-3.1% |
-23.7% |
|
UNH |
+1.9% |
-8.3% |
|
UTX |
+0.9% |
-12.6% |
|
HD |
+2.5% |
+6.5% |
|
TRV |
-0.7% |
-1.4% |
|
CVX |
+2.6% |
-7% |
Next Week’s Outlook
The broader markets and the blue-chip index have once again been guided by the direction of oil prices this week. The Fed’s reluctance about providing clear indications on whether it would increase rates in March also added to investors’ worries. Results from Apple and Boeing were particularly disappointing and weighed down the Dow.
Economic data has also been worrying in nature, but for the few bright spots on the housing front. Starting today, several crucial economic reports are scheduled for release. This includes data on GDP, manufacturing, services, construction spending and factory orders. If most of these are positive in nature, stocks could log steady gains in the days ahead.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment