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Dow 30 Stock Roundup: Caterpillar Raises Dividend, Merck's Keytruda Gets FDA Nod

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The Dow traversed a tough week, suffering losses for three consecutive sessions. Initially, investors were wary of the outcomes of the Fed and ECB meetings. The outcome of the meeting between President Trump and North Korea’s Kim Jong Un was also eagerly awaited.

Ultimately, these talks had little impact on market proceedings. Comments from the ECB were also largely welcomed by investors. However, the Fed’s rate hike led to losses for the bourses.

Last Week’s Performance

The Dow gained 0.3% last Friday as investors’ concerns related to global trade war and G-7 summit faded away. The blue-chip index posted its third straight positive trading sessions and closed at its highest level since March. Notably, The Procter & Gamble Co. (PG - Free Report) was the major advancer of the blue-chip index with a gain of 1.9%.

The index gained 2.8% over last week, its biggest weekly gain since March. The Dow posted its third straight weekly advance despite global trade war and tariff related conflicts. 

However, the index ended lower on last Tuesday, as trade tensions dented investors’ confidence. Notably, the Dow closed at its best single-day percentage gain since Apr 10, last Wednesday.

The Dow This Week

The index gained merely 5.78 points on Monday since investors were apprehensive about the outcome of the meeting between President Donald Trump and his North Korean counterpart Kim Jong Un. Additionally, markets eagerly awaited the outcome of meetings of three major central banks.

The index lost 1.58 points on Tuesday after gaining over two consecutive sessions. Notably, Verizon Communications Inc. (VZ - Free Report) was the major decliner of the blue-chip index with a loss of nearly 1%. However, movements of indexes were modest in either direction as investors were closely awaiting the outcome of meetings of the Fed and ECB.  

Meanwhile, investors’ concerns regarding trade war and geopolitical conflicts waned, at least for the time being, as President Donald Trump and North Korea leader Kim Jong Un inked an agreement to denuclearize Korean peninsula and stop war games.

The index declined 0.5% on Wednesday after the Federal Reserve announced its second rate hike for the year and indicated that the central bank may raise rates more aggressively going forward.

This was the second rate hike in 2018 and was in line with market expectations. Eight of 15 Fed officials now expect four rate hikes this year compared with seven at the March meeting.

The index lost 0.1% on Thursday after financials weighed on the index. Shares of JPMorgan Chase & Co. (JPM - Free Report) lost 1.8%, being as the largest drag on the blue-chip index. However, broader markets moved higher on strong retail sales and jobless claims numbers. Investors also welcomed the ECB’s comments on its program of bond purchases.

Components Moving the Index

The Boeing Company (BA - Free Report) recently won an $862.2 million modification contract for providing full-rate production of fifteen Lot 42 F/A-18E and three F/A-18F aircraft to the U.S Navy. The contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Boeing has a Zacks Rank #2 (Buy).

The majority of the work will be carried out in El Segundo, CA, St. Louis, MI and the rest would be performed in various locations across the United States. Work related to the deal is expected to be completed by June 2020. (Read: Boeing Wins $862M Navy Deal for the F/A 18 Aircraft)

Merck & Co., Inc. (MRK - Free Report) has received FDA’s accelerated approval for label expansion of its blockbuster anti-PD-1 therapy, Keytruda, to include advanced cervical cancer in second-line setting. The company will need to evaluate the drug in confirmatory studies in this indication for gaining continued approval.

The eligible patients for the treatment in cervical cancer will be selected based on an FDA-approved test for PD-L1 expression in tumors with combined positive score (“CPS”) ≥1. The approval comes a bit earlier than the expected date of Jun 28. The FDA had granted priority review to this label expansion regulatory application in March. (Read: Merck's Keytruda Gets FDA Approval for Cervical Cancer)

In a separate development, Zacks Rank #2 Merck announced FDA’s accelerated approval for its PD-1 inhibitor, Keytruda as a third-line treatment for adult as well as pediatric patients with primary mediastinal B-cell lymphoma (PMBCL), a type of non-Hodgkin lymphoma. (Read: Merck's Keytruda Gets FDA Nod for 2nd Lymphoma Indication)

Caterpillar Inc. (CAT - Free Report) reported a rise of 24% in global retail sales for the three months ended May 2018, a deceleration from the 28% rise witnessed in April and  average sales growth of 30% noted in the past four months of this year.

In a separate development, Caterpillar announced that its board of directors has approved an increase of 10% in quarterly dividend to 86 cents per share. The increased dividend will be paid on Aug 20 to shareholders of record as of Jul 20. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Walt Disney Company’s (DIS - Free Report) Avengers: Infinity War recently crossed $2 billion in gross collections globally in its 48th day of release (debut on Apr 27). Only three other movies — AvatarTitanic and Star Wars: The Force Awakens — have reached this milestone.

Avengers: Infinity War has collected $656.1 million by Jun 11, making it the fifth highest-grossing movie domestically. Per Zacks Rank #3 (Hold) Disney, “it holds the record for biggest domestic debut ever with $257.7 million in its opening weekend.”

Internationally, the movie has collected $1.346 billion. Notably, Avengers: Infinity War is the third biggest western release ever in China, with $369.7 million in gross collections since releasing in the country. (Read: Disney's Avengers: Infinity War Collects $2 Billion Globally)

Johnson & Johnson (JNJ - Free Report) has accepted a $2.1 billion offer from a private equity firm, Platinum Equity, for the sale of its LifeScan diabetes device unit. The company had announced the receipt of a binding offer from Platinum Equity in March. Johnson & Johnson has a Zacks Rank #3.

The LifeScan unit makes blood glucose monitoring products and generated revenues of $1.5 billion last year.

The move was in line with J&J’s strategic plans for its diabetes business. The company has been planning to streamline its non-core assets since last year. As part of the streamlining efforts, J&J had announced the closing of operations at its Animas Corporation diabetes care unit last October. (Read: J&J Accepts Platinum Equity's Offer for LifeScan Unit)

Exxon Mobil Corporation (XOM - Free Report) has accelerated the development of the Liza Phase 1 after commencing development drilling offshore Guyana. Development drilling for the first of 17 wells planned for Phase 1 was initiated in May. This facilitated the start of production scheduled for 2020.

The Liza prospect, operated by Zacks Rank #3 ExxonMobil, is located about 120 miles (193 kilometers) offshore Guyana in the Stabroek block and spreads across 6.6 million acres (26,800 square kilometers).

 ExxonMobil and its co-venturers have encountered estimated recoverable resources of more than 3.2 billion oil equivalent barrels on the Stabroek block. (Read: Exxon Mobil Expedites Liza Phase 1 Development Process)

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 0.4%.

Next Week’s Outlook

Though the Dow has endured a difficult week, things seem to be looking up for investors. For one, geopolitical tensions have been dialed down following the Trump-Kim talks. Secondly, ECB’s plan to taper its bond purchases has been welcomed by investors.

Further, even though markets moved lower after the Fed’s rate hike, the move has been largely priced in. Meanwhile, economic indicators continue to remain encouraging. Several key pieces of data, especially on housing, are lined up for release next week. If most of these are encouraging in nature, stocks could soon return to their winning ways.

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