Dow 30 Stock Roundup: Nike Beats, Economic Data Boosts, Yellen Limits Gains - Analyst Blog

The Dow has enjoyed three consecutive days of gains, a far cry from last week's dismal performance. Fears over further military action in Crimea abated as investors chose to focus on positive economic data. Comments from the Fed Chair spoiled the party somewhat, but the Dow returned to its winning ways on Thursday. During the first four trading days, the Dow has gained 1.65%.

Last Week's Performance

The Dow dropped for the fifth straight day, losing 0.3% on Friday following investor anxiety ahead of the referendum vote during the weekend in Crimea. Citizens of Crimea were to decide on Sunday whether to stay with Ukraine or become part of Russia.

For the week, the Dow lost 2.4%, marking its worst weekly decline since late January. Throughout the week, escalating political tension between Russia and the West over Crimea weighed heavily on the indexes. Also, concerns over a possible slowdown in China's economy and less-than-expected growth in Japan had a negative impact on the markets.

The Dow This Week

The blue chip index gained 1.1% on Monday after Crimea's vote to join Russia was conducted peacefully. The vote was overwhelmingly in favor of accession to Russia. The Dow rose for the first time in five sessions and all its 30 components finished in the green. Encouraging domestic economic numbers also boosted sentiment.

Receding fears of further military action related to Russia's annexation of Crimea helped the Dow gain 0.6% on Tuesday. U.S. stocks rallied for the second day in a row after Russian President Vladimir Putin said Russia didn't want further partition of Ukraine.

The Dow dropped 0.7% on Wednesday after Federal Reserve Chairwoman Janet Yellen commented that interest rate hikes might happen six months after the end of the economic stimulus plan. The quantitative easing program is expected to end this fall. This statement dragged benchmarks to their first drop in three trading days.

On Thursday, the blue chip index gained 0.7% after encouraging economic numbers boosted investor sentiment. The rise in Philadelphia Fed's manufacturing index and an increase in Conference Board's leading economic index was welcomed by investors. Positive economic data overshadowed Wednesday's rate hike fears.

Components Which Moved the Index

Nike Inc. NKE reported third quarter fiscal 2014 results wherein its earnings per share of 76 cents rose 4% year over year and surpassed the Zacks Consensus Estimate of 73 cents.

Results were driven by an impressive top line, lower tax rate, improvement in gross margin and moderately lower average share count, partly offset by higher selling, general and administrative (SG&A) expenses and negative effect of currency rates.

Excluding the impact of the currency, the top line surged 13% to $7 billion on the back of robust demand for the company's brands and significant growth in its main categories and all its locations. Sales also came ahead of the Zacks Consensus estimate of $6.8 billion

ExxonMobil Corp. XOM intends to team up with state-owned Vietnam Oil and Gas Group – PetroVietnam – to invest about $20 billion in a gas-fired power complex, according to the Ministry of Industry and Trade sources.

The project will include construction of two power plants with a combined capacity of 6,000 to 6,500 megawatts. This project is likely to make the United States one of the top four foreign investors in Vietnam along with Japan, South Korea and Taiwan.

General Electric Co. GE has recently filed an initial public offering (IPO) of its North American consumer lending unit. The IPO is expected to be closed by late 2014. Subsequently, GE Capital Retail Finance will operate under the name “Synchrony Financial” and will trade on the NYSE under the symbol SYF. The move is being viewed as the first definitive step to reduce credit risks and focus on core industrial businesses

JPMorgan Chase & Co. JPM recently entered into a definitive agreement with Mercuria Energy Group Limited to vend its physical commodity trading business for $3.5 billion. The deal is expected to close in third-quarter 2014 and is consistent with its initiatives to streamline business.

UnitedHealth Group Inc.'s UNH health service arm Optum has announced its decision to buy a majority stake in Audax Health Solutions, Inc. Audax, through its digital offerings, offers customer-friendly health management solutions. The terms of the deal have been kept under wraps.

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 up 1.40%.

Next Week's Outlook:

Positive economic data has provided significant impetus to markets this week. Next week also has several key reports lined up. These include housing sector and durable orders data and the crucial GDP report.

With fears over the Crimea waning, investors have also overcome rate hike concerns and external headwinds. Going forward, economic data and comments from important Fed officials will likely determine the direction of markets.

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