The Dow had a dismal week as energy prices continued to dominate proceedings. The blue chip index dropped on Monday after crude prices extended their losses to hit multi-month low. Concerns about an earlier-than-expected rate hike raised bond yields to a record level on Tuesday, leading to losses for the Dow.
The blue chip index closed in the green on Wednesday after tech shares moved higher. However, the Dow once again suffered marginal losses on Thursday, following geopolitical tensions and disappointing initial claims data. The Dow has lost 0.4% during the first four trading days.
Last Week’s Performance
The Dow gained 0.4% last Friday after a dismal jobs report reduced fears among investors about sooner-than-expected rate hike. Markets were negatively impacted in the initial hours by discouraging nonfarm payroll data. However, all the major benchmarks closed higher at the end of trading.
Moreover, a ceasefire agreement signed between Ukraine and pro-Russia separatists on Friday also lifted investor sentiment. In a NATO summit in Wales, Ukrainian President Petro Poroshenko announced that Ukrainian armed forces have been ordered to cease fire from 6 pm on Friday.
Over the week, the Dow rose 0.2%. Benchmarks swung between gains and losses through the week. Drop in oil demand following discouraging Chinese and European economic data and a stronger dollar dragged down oil prices. The decline in oil price had a negative impact on the major benchmarks. The Energy Select Sector SPDR (XLE) was the biggest loser among the S&P 500 sectors in the week. The sector declined 0.4%.
However, ECB’s announcement of rate cut and new stimulus measures to combat low inflation boosted investors’ confidence. Apart from jobs data, other economic reports including ISM Services and Manufacturing Indices, construction spending and factory orders were encouraging.
The Dow This Week
The Dow declined 0.2% on Monday after energy stocks suffered losses. The drop in energy shares came after crude prices extended their losses to hit multi-month low. The price of U.S. crude oil for October delivery declined 63 cents or 0.7% to $92.66 per barrel. This was the lowest level since January. Moreover, Brent crude also declined 62 cents to $100.2 per barrel.
Recent dismal economic data from the Eurozone and China, and stronger dollar have been among the major factors behind this slump in oil price. Incidentally, easing tensions in Ukraine and Iraq have also led to lower oil prices. Shares of Exxon Mobil Corporation, the world’s biggest oil trading company, declined 1.5%. Exxon was the worst performer among the blue chip companies.
Benchmarks dropped to their lowest levels in weeks as increasing concerns about the sooner-than-expected rate hike raised bond yields to a record level on Tuesday. Yields on the 10-year Treasury note increased 3 basis points to 2.5% following a decline in its price. This was the highest level in almost six weeks.
Concerns about an earlier-than-anticipated rate hike primarily boosted bond yields. Investors remained wary following encouraging economic data which may allow the Federal Reserve to raise the short-term interest rate earlier than expected. Strong forecasts for initial claims and retail sales data had also raised rate hike fears. Separately, shares of The Home Depot, Inc. (HD) dropped 2.1% after it accepted that it was a victim of data breach. The company was the worst performer among the blue chips. The Dow lost 0.6%.
Markets ended in the green on Wednesday, ending two days of losses. A rally in Apple’s shares boosted the technology sector. However, decline in oil prices dragged down energy shares. The price of Brent crude declined $1.12 to its lowest level of $98.04 per barrel since May 2013. U.S. crude also dropped $1.08 to $91.67 per barrel, its lowest price since January. Despite any major factor to provide direction, the Dow gained 0.3%.
Benchmarks ended almost flat after a choppy trading session on Thursday as renewed geopolitical tensions and disappointing jobless claims dented sentiment. President Obama announced that the US will collaborate with the European Union in expanding their sanctions against Russia.
Meanwhile, the Labor Department reported on Thursday that jobless claims increased to 315,000 for the week ending Sep 6, up from the previous week’s level of 304,000. However, gains in small-cap stocks and oil prices offset most of the day’s initial losses. U.S. crude oil price rose 1.3% yesterday to $92.83 per barrel, while the price of Brent crude edged up 0.04% to $98.08 a barrel. The Dow declined 0.1%.
Components Moving the Index
The Boeing Company (BA) received a large order for its latest model, the 737 MAX 200, from European low-cost carrier Ryanair (RYAAY). Ryanair has committed to purchase 100 737 MAX 200 aircraft valued at $11 billion at list prices. The airline has options to purchase another 100 aircraft. The news boosted the share price of Boeing by 2.64% on Monday. Boeing’s 737 model is one of the best-selling planes in the single-aisle market, primarily due to its fuel efficiency and passenger comfort.
General Electric Company (GE) recently inked a definitive agreement with premier electronics manufacturer Electrolux AB to divest its appliance unit for $3.3 billion. The divestiture is in tune with General Electric’s strategy to focus on core industrial businesses. The transaction is expected to close in 2015, subject to mandatory closing conditions and regulatory approvals.
Swedish electronics manufacturer Electrolux managed to acquire GE Appliance against other suitors in the fray such as New York-based start-up firm Quirky, which reportedly teamed up with The Blackstone Group L.P. (BX) for the bidding.
Home Depot Inc.’s shares fell nearly 2.1% after the company confirmed a breach of its payment data systems. The breach is likely to impact customers who have used payment cards at more than 2,000 Home Depot stores across the U.S. and Canada.
After a week’s investigation, Home Depot confirmed on Tuesday that hackers broke into its payment systems at stores. Therefore, the privacy of shoppers who have used their credit or debit cards at the stores since April this year might be at risk.
However, the company added that customers who shopped at its Mexico stores and online at HomeDepot.com were spared. The company began its investigation last week, after receiving calls from its banking partners and law enforcement regarding the data breach.
Merck & Co. Inc.’s (MRK) advanced melanoma treatment, Keytruda, has received FDA approval. The drug is approved in the U.S. at a dose of 2 mg/kg every three weeks for the treatment of patients suffering from unresectable or metastatic melanoma and whose disease progressed after treatment with Bristol-Myers Squibb Company’s (BMY) Yervoy (ipilimumab).
Merck mentioned in its press release that Keytruda becomes the first anti-PD-1 therapy to gain approval in the U.S. Merck intends to launch the immuno-oncology drug shortly in the U.S. Merck received accelerated approval for Keytruda based on tumor response rate and durability of response. Keytruda enjoys Breakthrough Therapy designation in the U.S. for advanced melanoma.
Microsoft (MSFT) recently revealed the new look for MSN. The revamped MSN offers a single platform that integrates exclusive content from globally renowned media outlets along with personal productivity tools.
MSN has collaborated with the likes of Postmedia, The Globe and Mail in Canada, The New York Times in the U.S, The Telegraph in the U.K., Hindustan Times in India, and Le Figaro in France. All these are globally renowned media outlets.
The revamped MSN has various personal productivity tools like a symptom checker, a fitness and diet tracker, and shopping lists. Besides this, it integrates access to popular sites like Facebook (FB) and Twitter (TWTR).
The Procter & Gamble Company (PG) recently introduced Crest Sensi-Stop Strips, a breakthrough at home treatment for the huge population suffering from tooth sensitivity problems. Crest Sensi-Stop Strips comprises small flexible semitransparent strips. It is designed to cover the outer gum line of the sensitive teeth so that the exposed dentinal tubules are blocked.
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 0.04%.
|
Ticker |
Last 5 Day’s Performance |
6-Month Performance |
|
V |
+0.7% |
-4.9% |
|
IBM |
+0.6% |
+2.9% |
|
GS |
+1.2% |
+6.7% |
|
MMM |
+0.8% |
+8.9% |
|
BA |
+2.1% |
+2.6% |
|
CVX |
-2.5% |
+7.1% |
|
UTX |
-0.2% |
-6.3% |
|
XOM |
-1.8% |
+3% |
|
MCD |
+0.1% |
-5.8% |
|
CAT |
-2.9% |
+9.1% |
Next Week’s Outlook
Energy prices continued to dominate proceedings this week. The sector recovered somewhat on Thursday after prices moved upward, offsetting initial losses for the day. Disappointing data on initial claims and concerns about an earlier-than-anticipated rate hike have also dampened investor sentiment. Geopolitical tensions are also providing markets with direction.
Energy stocks could continue to dominate proceedings in the days ahead if crude prices fall once again. However, next week features a series of crucial economic reports. This includes data on industrial production, inflation, housing starts and leading indicators. Positive news on this front could go in a long way in boosting stocks.
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