Dow 30 Stock Roundup: Ukraine, China Dent Mood, Boeing Adds to Gloom - Analyst Blog

The Dow has had a dismal week so far, suffering four straight declines. Markets have ignored domestic reports to focus on disappointing trade data from China. On Thursday, the Dow plunged following fresh military action by Russia on Ukraine's borders. During the first four trading days, the Dow has lost 1.89%.

Last Week's Performance

The Dow gained 0.2% last Friday on the back of better-than-expected nonfarm payroll data. Nonfarm payroll employment improved to 175,000 in February from 129,000 in January. The rise came despite harsh winter weather.

For the week, the Dow gained 0.8%. The benchmark remained in positive territory through the week as tension between Ukraine and Russia over the Crimea region subsided. The European Central Bank and the Central Bank of United Kingdom's decisions to leave key lending rates unchanged were welcomed by investors.

The Dow This Week

The Dow lost 0.2% on Monday due to a drop in China's export data and less-than-expected growth in Japan's economy. The fact that regulators had found ‘hairline cracks' on 787 Dreamliners also weighed on the blue chip index.

Investors booked profits on a Tuesday devoid of major economic developments. Positive economic data provided little excitement to the investors. On top of that, a fall in small business sentiment somewhat damaged the mood. The Dow declined 0.4%.

Benchmarks hovered in the negative zone for most of Wednesday, with the blue chip index losing 0.1%. China's dismal export data continued to weigh on investors, raising concerns of a possible slowdown in the world's second-largest economy.

On Thursday, Russia launched a fresh military exercise on the borders of Ukraine despite sanctions imposed by the European Union on Wednesday. Benchmarks turned negative after President Obama said the United States and other countries will be “forced to apply costs” to Moscow. The Dow suffered its fourth straight decline, plunging 1.4%.

Components That Moved the Index

The Boeing Company's BA stock fell 1.3% on Monday after federal records revealed that regulators had earlier warned of hairline cracks and corrosion problems on Boeing 777s. Last week, the Federal Aviation Administration FAA had issued an Airworthiness Directive (AD) to inspect U.S. registered 777 planes in operation for cracking and corrosion in the fuselage skin.

The cracking and corrosion problem on Boeing 777s could lead to rapid decompression and mid-air break-up. The FAA ordered checks on many Boeing 777s after receiving a report of cracking on the fuselage skin underneath a satellite antenna from one operator. This revelation is particularly telling in the light of the disappearance of Malaysia Airlines' Flight 370, a Boeing 777 aircraft.

Chevron Corp. CVX reaffirmed its long-term growth strategies in its annual analyst meeting. The company also announced its divestment plans and the revised 2017 production outlook. Chevron now expects to produce 3,100 thousand barrels of oil equivalent per day (MBoed) in 2017 against 3,300 MBoed stated earlier.

The decline is primarily due to an expected slowdown in the natural gas price, higher costs and project delays. The projected output is based on an assumed realization of $110 per barrel of oil, higher than the previous estimate of $79 per barrel.

Visa Inc. V and MasterCard Inc. MA are forming a new cross-industry group that would emphasize EMV chip technology adoption in the U.S. and concentrate on tokenization, point-to-point encryption and other online and mobile channel security-related requirements. The group will comprise banks, credit unions, acquirers, retailers, point-of-sale device manufacturers and industry trade groups.

The formation of this group serves as a platform where multiple industries can share ideas. This will also encourage the use of advanced technologies to combat payment frauds and generate superior security solutions.

Pfizer Inc. PFE could start facing generic competition for Celebrex earlier than expected. The United States District Court for the Eastern District of Virginia has ruled that the reissue patent for the drug, which was to expire on Dec 2, 2015 (including 6 months paediatric exclusivity), is invalid.

Several drug makers are looking to launch their generic versions of the drug in the U.S. on May 30, 2014, following the expiry of the basic compound patent (including 6 months paediatric exclusivity). This is a full 18 months before the expiry of the reissue patent. Pfizer intends to appeal the ruling.

3M Company MMM shares remained flat on March 7 after announcing the introduction of eAudiobooks to its 3M Cloud Library Digital Lending System. 3M announced a distribution deal with digital content provider Findaway World for the initial introduction of 40,000 titles. Thus, the 3M Cloud Library is expected to grow its digital circulation faster.

Performance of the Top 10 Dow Companies

The table given below shows the price movements of the ten largest components of the Dow, which is a price weighted index, over the last five days and during the last six months. Over this period, the Dow has moved down 2.09%.

Next Week's Outlook:

Investors have largely ignored domestic economic reports this week. However, it may be well worth noting that next week brings several important releases. This includes industrial production, housing data and leading indicators numbers.

Fresh Russian military actions and President Obama's recent statements have reignited tensions over the Crimean region. Citizens in Crimea will vote on Sunday to decide whether to stay with Ukraine or become part of Russia. The fate of this referendum will determine not just the political fate of that region, but also the health of the markets going forward.

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