Dow 30 Stock Roundup: Chevron Misses, UTX Bags $1.24B Deal - Analyst Blog

The Dow posted gains for most of the week following positive economic data and encouraging comments from the Fed Chair. An increase in the ISM Services Index helped the Dow move upwards on Monday. Tuesday was the sole day when the blue chip index declined following selling pressure in Internet stocks.

Encouraging comments from the Fed Chair helped the Dow gain on Wednesday. The Dow closed on a positive note on Thursday, following a decline in initial claims and dovish comments from the ECB President. During the first four trading days, the Dow has gained 0.12%.

Last Week's Performance

The Dow lost 0.3% on Friday due to escalating tension between Russia and Ukraine. Geopolitical tension also outweighed upbeat nonfarm payroll data, which had helped benchmarks open in the green. The U.S. Bureau of Labor Statistics said total nonfarm payroll employment had risen to 288,000 in April. The economy added the most number of jobs in April since January 2012.

The blue chip index closed in the green for the week, gaining 0.9%. Benchmarks advanced for the week following talk of a new deal between AstraZeneca PLC AZN and Pfizer Inc. PFE boosted investor sentiment. Upbeat quarterly-results from the likes of Merck & Co. Inc. MRK also had a positive impact on benchmarks.

Further, the Federal Reserve's decision to trim the monthly bond repurchase plan helped benchmarks end higher. The Federal Open Market Committee (FOMC) also indicated  that  economic activity has picked up since its last meeting in March. Additionally, the week's encouraging economic numbers on pending home sales, private-sector hiring and  manufacturing activity were welcomed by investors.

The Dow This Week

The Dow gained 0.1% on Monday after encouraging services sector data outweighed concerns emanating from escalating Ukraine-Russia geopolitical tension. The ISM Services index increased 2.1 percentage points to 55.2% in April from March's reading of 53.1%. The increase in the non-manufacturing Index also offset jitters related to weak Chinese manufacturing data.

Selling pressure in Internet stocks and a decline in American International Group, Inc.'s AIG quarterly income dragged benchmarks down on Tuesday. New deals in the health care sector failed to restrict the day's losses. The day's economic reports were limited to March's trade balance, which hardly made an impact on the markets. The blue chip index lost 0.8%.

Indications from Federal Reserve Chairwoman Janet Yellen that key lending rates would remain low helped the Dow gain 0.7% on Wednesday. In her testimony before the Joint Economic Committee, Yellen reiterated that the central bank intends to keep the federal funds rate low even after employment and inflation rates return to the desired level. Market sentiment also improved after Russian President Vladimir Putin agreed to discuss measures to ease the Ukrainian crisis.

The blue chip index gained 0.2% on Thursday while other benchmarks closed in the red. Markets gained initially following encouraging initial claims numbers and dovish comments from ECB President Mario Draghi. Speaking at a press conference, the ECB President said the central bank might lower lending rates or provide more economic stimulus during their June policy meeting. However, the session turned choppy following a late selloff in the utilities and energy sectors.

Components Which Moved the Index

Chevron Corp. CVX reported weak first quarter results on falling production and oil prices. Earnings per share came in at $2.36, below the Zacks Consensus Estimate of $2.53 and deteriorated considerably from the year-ago adjusted profit of $3.18 per share. The integrated supermajor's quarterly revenue decreased 6.3% year over year to $53,265.0 million and was way below the Zacks Consensus Estimate of $66,446.0 million.

Chevron's total production of crude oil and natural gas decreased by 2.2% from the year-earlier level to 2,588 thousand oil-equivalent barrels per day (MBOE/d). U.S. output dipped 3.6% year over year, while Chevron's international operations (accounting for 75% of the total) registered a 1.7% fall in volumes.

Chevron's downstream segment achieved earnings of $710.0 million, slightly higher than the profit of $701.0 million last year. The results were positively influenced by improved profitability from U.S. on the back of higher refined product sales margins, lower operating expenses and lower turnaround activities.

United Technologies Corp.'s UTX unit Sikorsky Aircraft Corp. bagged a $1.24 billion worth contract from the U.S. Navy to develop and build the new U.S. presidential helicopter fleet. The new choppers will replace the Marine One copters, also built by Sikorsky, that presently ferry the U.S. president and executive branch officials.

Under the deal, Sikorsky will build 6 new choppers as the first stride towards Pentagon's intended fleet of 21 new helicopters by 2023. Per the contract, Sikorsky will build, test and deliver 6 S-92 helicopters as certified by the Federal Aviation Administration, along with 2 trainer simulators to the U.S. Marine Corps.

General Electric Co. GE has made a tender offer worth about $389 million to acquire a stake in two of Alstom SA's India units, according to media reports. Recently, General Electric made a $16.9 billion bid to buy the French conglomerate's energy operations.

The proposal will be realized only if General Electric's bid to buy the French giant's energy unit goes through, as then the U.S. group will be required to launch a tender offer for Alstom's Indian businesses in order to conform to local regulations.

JPMorgan Chase & Co. JPM provided its latest outlook in quarterly filings with the Securities and Exchange Commission. The company expects second quarter 2014 market revenues to be down approximately 20% year over year. Following this filing, shares of JPMorgan fell nearly 1.5% in after-hour trading last Friday.

JPMorgan anticipates market revenue to be roughly $4.3 billion, based on the market revenue results to date. The company stated that the overall economic environment had continued to remain challenged and client activity was lower as well. Notably, market revenue had declined 17% in the first quarter.

The Coca-Cola Co. KO has agreed to do away with brominated vegetable oil (BVO) in its citrus-flavored products, according to media reports. The decision comes after some of the drinks of the company were severely criticized by food activists on social media and online forums.

Coca Cola will, reportedly, discontinue the usage of BVO in its drinks by the end of fiscal 2014. Though the company did not provide any list of products, per media reports, the ingredient will be removed from Fresca and some varieties of Fanta also.

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 declined 0.06%.

Next Week's Outlook:

Despite a mixed week for other benchmarks, the Dow has made gains on most trading days. Economic data has been encouraging and comments from the Fed Chair have added to market optimism. The situation in Ukraine continues to daunt investors but recent overtures from Russia have been encouraging.

Earnings numbers continue to pour in and will continue to impact the fortunes of benchmarks. Next week has several key economic reports lined up. These include retail sales, industrial production and housing starts data. Taken together, they could well provide direction for markets going forward.

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