Market Overview

Dow 30 Stock Roundup: Microsoft Announces Nokia X2, GE Wins Alstom Board Approval - Analyst Blog

The Dow had a disappointing week, weighed down by several disparate factors. Investors took a breather on Monday as the blue chip index ended a six-day rally, closing with minute losses. The Dow suffered its largest loss in over a month on Tuesday following tensions in Iraq. Wednesday was the brightest spot of the week for the blue chip index, as it moved upward buoyed by gains in media stocks. But the Dow fell once again on Thursday following comments from a Fed official on the timing of a rate hike. During the first four trading days, the Dow has lost 0.54%.

Last Week's Performance

The Dow added almost 0.2% on Friday as optimism from Wednesday's Fed policy statement spilled over into a second successive day. The Dow extended its winning streak to six sessions; it's longest since Dec 2013. The blue-chip index also settled at a record high. On Friday, volumes were also higher than usual on a “quadruple witching” day. A quadruple witching refers to the third Friday of every March, June, September and December. On these days, market index futures, market index options, stock options and stock futures expire, usually resulting in increased volatility.

For the week, the Dow gained 1%. Benchmarks ended in positive territory for the week as optimism from Wednesday's policy statement continued. Gains in financial and small-cap stocks also ensured a positive finish for the benchmarks. Several new deals also boosted investor sentiment. Encouraging data on manufacturing activity in the New York region, industrial production and U.S. homebuilders' confidence also added to the bullish sentiment.

However, gains were kept in check, owing to concerns over sectarian clashes in Iraq and its effect on crude oil prices. On Monday, militants in Iraq published images of hundreds of executed Shiite Iraqi soldiers. The militants claimed to have executed the soldiers. The Wall Street Journal had reported that militant rebels and government forces continued their fight and killed 28 ISIS fighters. Iraq accounts for 3.3 million barrels of crude every day.

The Dow This Week

Benchmarks traded mostly in the negative zone before closing Monday's trading session little changed as investors took a breather. The Dow snapped a six-day rally and closed with minute losses, declining nearly 0.1%. New deals between Wisconsin Energy Corp. (NYSE: WEC) and Integrys Energy Group, Inc. (NYSE: TEG), and Oracle Corporation (NASDAQ: ORCL) and MICROS Systems, Inc. (NASDAQ: MCRS) were welcomed by investors. Meanwhile, General Electric's purchase of Alstom's energy assets had a negative impact on the industrial sector. The day's positive economic data on existing home sales failed to drive benchmarks higher.

The blue chip index declined 0.7% on Tuesday, suffering its biggest drop in over a month. The day's initial gains, largely a result of encouraging home sales data and an improvement in consumer confidence, were eroded by the end of the trading session. The Consumer Confidence Index increased from 82.2 in May to 85.2 in June.Additionally, new home sales in May touched the highest annual level in six years. However, benchmarks reversed course post noon to settle in the red on Tuesday. Escalating tension in Iraq was cited as the primary reason that led to the selloff.

Gains in media stocks helped benchmarks shrug off weak economic data and settle in the green on Wednesday. Investors ignored the biggest contraction of the U.S. economy in the first quarter since early 2009 and also overlooked an unexpected fall in durable goods orders. Broadcaster stocks rose on Wednesday after Supreme Court ruled in their favor over start-up online-video service provider, Aereo Inc. However, oil refinery stocks declined after The Wall Street Journal reported that the U.S. is about to ease the ban on crude oil exports for the first time in nearly 40 years. The Dow gained 0.3%.

The Dow declined 0.1% on Thursday following St. Louis Fed president James Bullard's comments on a rate-hike. Bullard expects the key interest rate hike to take place sooner than anticipated. The blue-chip index had dropped as much as 119 points, before trimming losses in the post noon session. Economic data on personal consumption expenditure was weaker-than-expected. However, personal income and claims for unemployment benefits were in line with expectations.

Components Moving the Index

General Electric Company (NYSE: GE) won unanimous approval of the French conglomerate Alstom's board to acquire its energy assets in a $16.9 billion deal, taking it a step closer to clinching its biggest acquisition ever. The board's approval came a day after the French Socialist government gave General Electric the go-ahead to acquire most of Alstom energy operations. The deal, subject to customary regulatory and shareholder approvals, is expected to conclude in 2015.

General Electric cleared the final obstacle in the energy deal with the French government agreeing to acquire 20% stake in Alstom from its leading stakeholder Bouygues. The arrangement will grant the government an option to buy the stake in Alstom, which will get activated after the closing of the General Electric-Alstom deal and expire after 20 months.

Microsoft Corporation (NASDAQ: MSFT) announced the launch of Android smartphone — X2 — under Nokia's (NYSE: NOK) X family of low-cost devices. The new handset has larger display, improved rear-facing cameras and better performance compared to the original Nokia X.

Powered by Google's (GOOGL) Android OS, Nokia X2 offers a 4.3-inch ClearBlack display, 5-megapixel rear camera, VGA front camera, 4GB internal storage, 1GB RAM and Snapdragon 1.2GHz dual-core processor, while the original Nokia X had a 1Ghz processor. Currently available in select countries for €99, Nokia X2 will be rolled out globally in July.

Cisco Systems (NASDAQ: CSCO) and NetApp Inc. (NASDAQ: NTAP) recently stated that their FlexPod solution has generated over $3 billion in combined sales. FlexPod has gained in popularity since the companies came together to launch the series in Nov 2010.  Flexpod shipments have registered staggering growth of 81% year over year coupled with an average demand of $2 billion on an annual basis.

NetApp and Cisco collaborated to introduce this product, which is expected to accelerate the transition to the cloud. The FlexPod integrated infrastructure solution is built on a flexible, scalable, shared infrastructure that combines computing, networking and storage solutions.

ExxonMobil Corporation's (NYSE: XOM) share price fell by 1.6% on Tuesday following news that the company intends to team up with state-run Turkish Petroleum Corporation for possible exploration of shale gas in the country's southeast and northwest regions. The news was reported in Reuters.

The two parties had held talks in 2012 but there was no successful outcome. However, later, the negotiation progressed and now, it is likely to result into an agreement. ExxonMobil has shown interest to explore the onshore prospects in the southeast and in Thrace, which is in northwestern Turkey.

Wal-Mart Stores, Inc.'s (NYSE: WMT) Sam's Club division has launched an online booking service – Sam's Club Travel - to serve the business and leisure travel needs of its members. It has partnered with Tourico Holidays, a worldwide leader in innovative wholesale travel services, in this regard. Tourico's business model aims to provide reasonable deals to its members, even amid rising costs of fuel, flights and accommodations.

Through its SamsClub.com/travel website, Sam's Club members can select their choice of destination or opt for any vacation package and also save on every package selected from an available range of 4,500 worldwide destinations, 90,000 hotels, 150 airlines, 18 car rental brands and 13 cruise lines. The website is user-friendly, hassle-free and does not allow pop-up windows and external sites to interfere.

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 lost 0.64%.

Ticker

Last 5 Day's Performance

6 Month Performance

V

-0.90%

-4.88%

IBM

-0.85%

-2.54%

GS

-1.21%

-4.73%

MMM

-0.43%

+3.14%

BA

-3.96%

-6.49%

CVX

-0.30%

+4.54%

UTX

-1.94%

+2.62%

XOM

-1.16%

+0.51%

MCD

-0.55%

+4.75%

CAT

+0.49%

+19.42%

Next Week's Outlook

Markets have ignored crucial economic data such as the contraction in first quarter GDP. A fall in durable orders and less-than-expected personal consumption expenditure have also failed to guide the markets. Instead, the situation in Iraq and comments on the timing of an interest rate hike has held centerstage. 

The conflict in Iraq and its effect on oil prices will possibly continue to effect market movement. Further comments from the Fed may also impact markets, depending on the nature of the statements. However, next week has some crucial reports lined up. This includes ISM data on manufacturing and the services sector, construction spending and the unemployment rate. Positive data from these sources could play a key role in putting the markets back on track.

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WAL-MART STORES (NYSE: WMT): Free Stock Analysis Report
 
WISC ENERGY CP (NYSE: WEC): Free Stock Analysis Report
 
MICROSOFT CORP (NASDAQ: MSFT): Free Stock Analysis Report
 
NOKIA CP-ADR A (NYSE: NOK): Free Stock Analysis Report
 
CISCO SYSTEMS (NASDAQ: CSCO): Free Stock Analysis Report
 
NETAPP INC (NASDAQ: NTAP): Free Stock Analysis Report
 
INTEGRYS ENERGY (NYSE: TEG): Free Stock Analysis Report
 
ORACLE CORP (NASDAQ: ORCL): Free Stock Analysis Report
 
MICROS SYS (NASDAQ: MCRS): Free Stock Analysis Report
 
EXXON MOBIL CRP (NYSE: XOM): Free Stock Analysis Report
 
GENL ELECTRIC (NYSE: GE): Free Stock Analysis Report
 
GOOGLE INC-CL A (GOOGL): Free Stock Analysis Report
 
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