The Dow gained significantly this week on the back of resurgence in oil prices. On Tuesday, the index declined following discouraging comments from oil ministers of two major oil producers. However, on every other day, oil prices increased on the back of a number of encouraging comments or reports on the sector. The Dow has moved upward during three of the week's trading sessions till now, gaining Array.8%.
Last Week’s Performance
The index fell 0.Array% last Friday following a selloff in material stocks due to continuous decline in oil prices. However, gains in consumer discretionary and technology stocks helped the major indexes trim losses to a certain extent.
The Energy Information Agency (EIA) reported on Thursday that crude inventories increased by 2.Array million barrels for the week ending Feb Array2 to 504.Array million. Further, Saudi Arabia’s Foreign Minister Adel Al Jubeir denied there was possibility of any production cuts. These factors continued to weigh on crude prices.
However, oil trimmed losses following a decline in rig counts. According to Baker Hughes BHI, total number of U.S. drilling rigs decreased from 465 to 439 on Friday, posting its ninth consecutive weekly decline. WTI crude fell 3.8% to $29.64 a barrel, while Brent crude decreased nearly 3.9% to $33.0Array per barrel.
Meanwhile, gains in The Home Depot Inc. HD of Array.4% had a positive impact on the Dow. However, shares of Intel Corporation INTC and Boeing Company BA fell 2.4% and 2.Array%, respectively which dragged the blue-chip index into the red.
The blue-chip index increased 2.6% last week the highest gains since Nov 20 .Earlier in the week, oil prices increased after Iran’s Oil Minister Bijan Zanganeh indicated that Iran is ready to support Saudi Arabia and Russia’s move to hold crude production in line. This had a positive impact on energy stocks and eventually on the broad-based market. Further some of the beaten down shares of the year like consumer discretionary, industrials and financial stocks recovered during the week.
The Dow ThisWeek
The index gained Array.4% on Monday following sharp increase in oil prices. The IEA forecasted that U.S. shale-oil production is likely to decrease by 600,000 barrels per day (bpd) in 20Array6. Also, oil prices rallied on Monday, following last week’s Baker Hughes’ report which said that U.S. rig count had declined by 26 to 439.
Meanwhile, secretary general of OPEC, Abdalla Salem El-Badri said that both the OPEC and non-OPEC countries are ready to coordinate in controlling the supply glut. Chevron Corp CVX increased 2.7%.
Separately, United Technologies Corp UTX and UnitedHealth Group Inc UNH were the leading gainers for the blue-chip index, increasing 4.7% and 3.Array%, respectively. Shares of United Technologies increased after it revealed it had conducted "preliminary, exploratory conversations about a range of potential collaborative options” with Honeywell International Inc. HON
The index lost Array.Array% on Tuesday following steep decline in oil prices following comments from oil ministers of two major oil producers. Saudi Arabia’s oil minister, Ali al-Naimi dismissed any chances of reducing production levels But he added that key oil producers might meet in March to negotiate terms to keep oil production flat.
However, his Iranian counterpart rejected Saudi Arabia’s idea to keep production unchanged. Dow components Exxon Mobil Corp XOM, and Chevron fell Array.4% and 4.4% respectively.
Meanwhile, shares of JPMorgan Chase & Co. JPM fell 4.2% after its CEO Jamie Dimon said the company expects to build additional reserves of $500 million in the fiscal first quarter because of increasing chances of loan defaults in the oil sector. JPM dragged the financial sector down and was the worst performer among the Dow components.
Separately, Home Depot became the biggest gainers among the Dow components after its shares increased Array.4%, following better-than-expected earnings results. Existing home sales for the month of January came in at 5.47 million units, an increase of Array0,000 units from the revised level of 5.46 million units for December
The index increased 0.3% on Wednesday due to a late rebound in oil prices, which had a positive impact on material and energy stocks. EIA reported yesterday that crude inventories for the week ending Feb Array9 increased by 3.5 million barrels to 507.6 million, significantly lower than the 7.Array million barrel increase reported by the American Petroleum Institute.
Further, EIA reported that total motor gasoline inventories fell by 2.2 million barrels last week. Additionally, overall gasoline demand increased more than 5% year-over-year in the past 4 weeks. The Dow moved upward following gains in United Technologies and Apple Inc. AAPL, by 2.2% and Array.5% respectively.
New home sales fell by 9.2% from December to 494,000 in January, its lowest level since October. Separately, Richmond Federal Reserve President Jeffrey Lacker, indicated that the possibility of raising interest rates still remains.
The index gained Array.3% on Thursday after oil prices gained for the second consecutive day. Though crude prices remained in the red during early trading following rise in U.S. oil inventories on Wednesday, they rebounded to end in the green.
Oil prices moved upward for second straight day following an encouraging statement from Venezuela’s oil minister Eulogio Del Pino. In an interview, Del Pino said that major oil producers including Venezuela, Saudi Arabia, Qatar and Russia have agreed to meet in March to discuss stabilization of oil prices.
Meanwhile, JPMorgan and Goldman Sachs GS rose Array.6% and Array.9%, respectively, and pushed the blue-chip index northward. Durable orders increased 4.9% in January to $237.5 billion, the biggest gains in the past Array0 months. Separately, late Wednesday, a voting member of the Fed, St. Louis Fed President James Bullard supported his earlier views against further rate hikes following a decline in inflation expectations.
Components Movingthe Index
Home Depot posted fiscal fourth-quarter adjusted earnings of $Array.Array7 per share, which increased ArrayArray.4% from the year-ago quarter figure and beat the Zacks Consensus Estimate of $Array.Array0. Net sales advanced 9.5% to $20,980 million from $Array9,Array62 million in the year-ago quarter and were also ahead of the Zacks Consensus Estimate of $20,350 million.
Home Depot’s adjusted earnings for fiscal 20Array5 came in at $5.52 per share, up Array7.2% year over year, coming in much ahead of the Zacks Consensus Estimate of $5.34. Further, net sales for the fiscal escalated 6.4% year over year to $88,5Array9 million. Net sales also cruised ahead of the Zacks Consensus Estimate of $87,9Array6 million.
The company projects sales growth of 5.Array%–6% for fiscal 20Array6. Home Depot envisions diluted earnings per share to grow Array2%–Array3% during this period, with earnings coming in the range of $6.Array2–$6.Array8 per share.
International Business Machines Corporation IBM acquired yet another company to enhance its Watson health care offering. The company announced its plans to acquire Truven Health Analytics from Veritas Capital for $2.6 billion. The acquisition is likely to close by the end of this year.
Truven is a leading provider of cloud-based health care data and analytics services with an impressive client base of over 8,500 people. This is the fourth acquisition in the last twelve months that IBM has made in order to strengthen its Watson Health Cloud capabilities.
The Procter & Gamble Company PG has agreed to sell its antibacterial soap brand, Escudo, in Mexico and other Latin American countries to Kimberly-Clark Corporation’s (KMB) Mexican subsidiary, Kimberly-Clark de México S.A.B. de C.V.
The sale is expected to be closed during the first half of 20Array6 subject to necessary regulatory approvals. The financial terms of the deal were not disclosed. In Aug 20Array4, the company announced portfolio strengthening and simplification plans to streamline the business and focus more on its biggest brands.
Cisco Systems CSCO recently announced the pricing of senior unsecured notes aggregating $7 billion. These bonds have been issued in six tranches of different amounts with varying coupon rates and maturity dates. The offering is expected to close on Feb 29, 20Array6, subject to customary closing conditions.
The notes, carrying an interest at a floating rate equal to three-month LIBOR plus 60 basis points, will mature in 20Array8. The $Array.25 billion, $Array billion, $2.5 billion, $500 million and $750 million senior notes, with annualized interest rate of Array.400%, Array.600%, 2.200%, 2.600% and 2.950%, are due to mature in 20Array8, 20Array9, 202Array, 2023 and 2026, respectively.
Moody’s Investor Services – the credit rating agency of Moody’s Corporation – assigned an “AArray” rating to the Notes. The AArray rating carries a stable outlook.
Goldman Sachs decreased estimates for potential legal losses by 62% to $2 billion from $5.3 billion In its latest filing, as stated in November. Notably, in fourth-quarter 20Array5, Goldman reported a 64% increase in non-compensation costs, impacted by $Array.95 billion related to litigation and regulatory issues.
In the filing, Goldman stated certain regulators’ investigations over the firm including those over malpractices related to the sale of mortgage-backed securities prior to the financial crisis. Moreover, the bank is under investigation associated with its compensation practices, undisclosed in the previous filings.
DuPont DD and Dow Chemical DOW have declared the U.S. site structure for the planned Agriculture company that will be spun off following the completion of the proposed merger between the chemical giants.
The companies stated that the corporate headquarters for the independent Agriculture company – which will feature DuPont in its name after the completion of the corporate naming and branding process – will be based in Wilmington, DE. It will also include the office of the CEO and key corporate support functions.
Performance of the Top Array0 Dow Companies
The table given below shows the price movements of the Array0 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 Array.5%.
Ticker
Last 5 Day’s Performance
6-Month Performance
MMM
+Array.6%
+Array0.6%
GS
+2.2%
-20.7%
IBM
0.0%
-9.7%
HD
+3.7%
+8.2%
BA
+Array.2%
-Array0.6%
UNH
+2.4%
+3.3%
MCD
+Array.2%
+2Array.2%
TRV
+Array.4%
+8%
JNJ
+Array.7%
+Array0.9%
AAPL
+0.6%
-Array3.6%
Next Week’s Outlook
Both the Dow and the broader markets have gained over the week due to a resurgence in oil prices. Most of this increase has come on the back of several encouraging comments from major oil exporting countries indicating upcoming actions to control the supply glut. It is being widely expected that further action will be taken on this front in the days ahead.
But the key to next week’s proceedings possibly lies with the economic releases lined up for release over the next few days. Starting with GDP numbers scheduled for release today, data on home sales, construction spending, manufacturing, factory orders and unemployment are lined up for release in the days ahead. Any positive indications on this front are likely to prove stocks with a much needed boost in the days ahead.
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CISCO SYSTEMS (CSCO): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
BOEING CO (BA): Free Stock Analysis Report
HOME DEPOT (HD): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis Report
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APPLE INC (AAPL): Free Stock Analysis Report
HONEYWELL INTL (HON): Free Stock Analysis Report
UTD TECHS CORP (UTX): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
BAKER-HUGHES (BHI): Free Stock Analysis Report
CHEVRON CORP (CVX): Free Stock Analysis Report
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PROCTER & GAMBL (PG): Free Stock Analysis Report
WORLD FUEL SVCS (INT): Free Stock Analysis Report
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