For Immediate Release
Chicago, IL – August 17, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Exxon Mobil Corporation (XOM - Free Report) , Chevron Corporation (CVX - Free Report) , Walt Disney Company (DIS - Free Report) , Apple Inc. (AAPL - Free Report) , Caterpillar Inc. (CAT - Free Report) , Cisco Systems (CSCO - Free Report) , General Electric Company (GE - Free Report) , Capital One Financial Corporation ( (COF - Free Report) , Verizon Communications Inc. (VZ - Free Report) ), McDonald's Corp. (MCD - Free Report) , American Express Company (AXP - Free Report) and Intel (INTC - Free Report) .
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Here are highlights from Friday’s Analyst Blog:
Dow 30 Stock Roundup:
The Dow endured another volatile week, plagued by a sudden devaluation of the yuan and guided by oil prices to some extent. Gains in energy and commodity related stocks helped benchmarks settle in the green on Monday. The Dow erased all of Monday’s gains after a sudden devaluation of the yuan. The yuan declined for a second successive day and the blue-chip index took a hit before recovering to end the day nearly flat. The Dow closed Thursday’s session nearly unchanged as well after a drop in energy stocks negated gains from resurgence in retail sales. The Dow has gained 0.2% during the first four trading days.
Last Week’s Performance
Last Friday, the Dow hit a six-month low, losing 0.3% after jobs data heightened concerns about a rate hike in September. The Dow ended in the red for the seventh straight session, its longest losing streak since the debt ceiling drama in 2011. The blue-chip index lost almost 380 points in these seven sessions. At this point, the Dow’s 50-day moving average was just shy off 23 points from going below the 200-day moving average.
The U.S. economy created a total of 215,000 jobs in July. The tally was less than June’s upwardly revised job numbers of 231,000. However, the unemployment rate in July remained unchanged from June’s seven-year low rate of 5.3%.
Meanwhile, expectations of a rate hike boosted the dollar which eventually had a negative impact on prices of oil and other commodities. Price of WTI crude oil declined 1.8% to $43.87 per barrel on Friday, its lowest level in more than four months. Additionally, the Brent crude oil declined 1.9% to $48.61 per barrel, its lowest level since January. Dow components Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) declined 1.6% and 1.7%, respectively.
For the week, the Dow declined 1.8%. Rate hike fears along with massive decline in media shares dragged down major indexes to the red for the week. The Dow ended in the red as disappointing earnings performance of The Walt Disney Company (DIS - Free Report) weighed on the blue-chip index, while a significant decline in Apple Inc.’s (AAPL - Free Report) shares also weighed on broader markets.
The Dow This Week
Gains in energy and commodity related stocks helped benchmarks settle in the green on Monday. Rebound in oil prices helped energy shares move north, eventually boosting the broader markets. The Dow gained 1.4% as key components Exxon Mobil and Chevron advanced 2.5% and 2.6%, respectively.
Meanwhile, Fed vice chairman Stanley Fischer’s comments that a September rate hike is unlikely also improved investor sentiment. Fischer doesn’t expect the central bank to raise federal funds rate until the Fed achieves its inflation target of 2%.
Additionally, an uptick in Chinese shares also added to the bullish mood. China’s exports plunged 8.3% in July, its largest drop in the last four months, raising hopes that the world’s second largest economy may inject more stimulus measures. The Shanghai Composite Index gained 4.9% while the smaller Shenzhen Composite rose 4.5%.
Stocks closed Tuesday’s session in the red after a sudden devaluation of the yuan. Benchmarks lost a minimum of 1% following the People’s Bank of China’s surprise move to reduce the value of China’s currency by 2%.
The Dow lost 1.2%, erasing all of Monday’s gains and suffering a decline in excess of 210 points. The blue-chip index’s 50-day moving average slipped below its 200-day moving average, forming a “death cross”. This is often interpreted as a symbol that the market’s Bull Run is nearing its end.
Companies with significant China exposure took a hit and concerns about the world’s economic environment heightened. Leading the decliners was Apple, which experienced a 5.2% decline and weighed on all major indices. Caterpillar Inc.’s (CAT - Free Report) shares declined 2.6%.
Gold prices gained as funds flowed into safe haven assets and a September rate hike seemed unlikely. Meanwhile, WTI crude oil price nosedived 4.4% to $43.08 per barrel on Tuesday, reaching its lowest intraday level of $42.69 in five months. Brent crude dropped 2.5% to $49.18 per barrel.
The Dow ended nearly flat on Wednesday following a volatile trading session. The yuan declined for a second successive day and the blue-chip index took a hit before recovering from steep declines suffered earlier in the day. Wednesday’s decline led to a 277-point intraday loss for the Dow, following Tuesday’s 212 point decline.
Ultimately, Apple moved higher and oil prices increased, boosting energy stocks, which also helped stocks stage an afternoon rebound. Shares of the iPhone marker suffered an intraday loss of 3% at one point. The iPhone maker staged a 1.5% rebound later in the day, delivering a major boost to all three indices.
The International Energy Agency (IEA) made a statement saying that oil demand was increasing at the fastest pace in five years. As a result, oil prices rebounded from their Tuesday lows, boosting energy stocks.
The Dow closed Thursday’s session nearly flat, increasing 0.03%. A drop in energy stocks negated gains from a resurgence in retail sales and better-then-expected results from Cisco Systems (CSCO - Free Report) . Shares of the tech major gained 2.9% following impressive results.
Retail sales increased 0.6% in July, in line with the consensus estimate. Additionally, June data was revised from a 0.3% decline to reflect that sales had remained nearly flat. Additionally, initial claims increased by 5,000 to 274,000, for the week ending Aug 8. However, the 4-week moving average declined by 1,750 from the earlier week to 266,250. This is the lowest level recorded in more than 15 years.
Meanwhile, U.S. crude slumped 3% to its lowest level in nearly six and a half years. A substantial rise in U.S. stockpiles heightened concerns about oversupply on the global level. Chevron and Exxon Mobil lost 1.1% and 0.2%, respectively.
Trading witnessed large intraday fluctuations with the Dow swinging within a range of 140 points before ending Thursday nearly unchanged. Stocks erased a majority of their gains during the last hour of trading.
Components Moving the Index
Cisco reported fourth-quarter fiscal 2015 earnings of 52 cents, which beat the Zacks Consensus Estimate by a penny. The adjusted earnings per share exclude one-time items but include stock-based compensation expenses.
Revenues increased 5.8% sequentially and 3.9% year over year to $12.8 billion and came above the Zacks Consensus Estimate of $12.63 billion.
For the first quarter of fiscal 2016, Cisco expects revenues to increase in the range of 2% to 4% annually. Non-GAAP gross margin is expected within 61–62% and non-GAAP operating margin in the range of 28–29% of revenues. The company expects GAAP tax rate of 23%, yielding non-GAAP earnings per share of 55 cents to 57 cents. The Zacks Consensus Estimate is pegged at 50 cents.
General Electric Company (GE - Free Report) announced the sale of its healthcare-related loans and its Healthcare Financial Services (“HFS”) U.S. lending business to Capital One Financial Corporation (COF - Free Report) for approximately $9 billion.
The offloaded GE unit finances financial companies, developers and investors across the healthcare industry. As part of the transaction, Capital One will receive a portfolio of loans to healthcare firms ranging from hospitals to pharmaceutical companies, valued at about $8.5 billion. The deal is expected to close by year end.
This latest divestment in GE’s sweeping overhaul of its finance arm pushes its asset sales past the $78 billion mark, and takes it one step closer to its target of offloading $100 billion this year.
Verizon Communications Inc. (VZ - Free Report) recently said that it has decided to discontinue its policy of subsidizing phones for new customers and is totally doing away with two-year service contracts as well.
The company unveiled its new data plans, with the aim of simplifying its offerings for customers. Moreover, customers will have the choice of two options – of either paying for their smartphones in monthly installments or of buying them outright.
In the absence of contracts, customers can also freely switch between plans every month. Meanwhile, existing subscribers may either opt to stick to their current plans or switch to one of the new plans.
McDonald's Corp.’s (MCD - Free Report) unit McDonald’s Holdings Company (Japan), Ltd. reported a loss for the first half of 2015. McDonald's Japan unit reported net loss of 26.22 billion yen as against a profit 1.85 billion yen a year ago as a slew of food safety scandals continue to keep consumers away from its restaurants. This is reportedly the biggest net loss the company has incurred since the listing of McDonald's Holdings in 2001.
McDonald's Holdings’ sales of 85.28 billion yen in the first half of the year were down 29.5% compared with the six-month period through Jun 30, 2014. Sales on a same-store basis plunged 27.7% from the same period in 2014 on an 18.8% decline in same-store guest count.
McDonald's Japan is expected to incur a net loss of 38 billion yen in 2015. Revenues are expected to decline 10% to 200 billion yen this year. The quick-service chain also announced that it would close 131 underperforming stores in the country by the end of fiscal 2015.
Apple has collaborated with American Express Company (AXP - Free Report) or AmEx in order to integrate Apple Pay services with AmEx corporate card.
AmEx earlier allowed non-corporate cards to be integrated with Apple Pay. On Aug 10, the company declared that its corporate card users could now add their accounts to pay for in-app and in-store purchases using the Apple Pay mobile payments system. The deal represents the first ever major corporate card tie up with Apple Pay that can significantly increase the number of Apple Pay users.
Intel (INTC - Free Report) has won Apple’s modem business for the next generation iPhone, according to Northland Capital Markets. Reports say that Intel will provide its XMM 7360 LTE modem to power 50% of the next iPhones slated for launch on Sep 9. These modems will most likely be used in cheaper versions of the iPhone 6s or the iPhone 6c.
ExxonMobil announced its intention to boost its light crude processing capacity at the Beaumont refinery. The production capacity is expected to increase by 20,000 barrels per day and thereby enhance the refining facility’s flexibility. It will also strengthen ExxonMobil’s integrated downstream portfolio in Southeast Texas.
Next Week’s Outlook
China’s surprise move to devalue the yuan has added to investors’ list of worries. This has led to additional volatility during several sessions. Market watchers have been worried about the possibility of a currency war, with countries undertaking competitive devaluations. Oil prices have also guided markets to a significant extent.
This has also led to uncertainty about the timing of a Fed rate hike. However, economic data has been positive in nature, especially retail sales and jobs data. This implies that volatility caused by the yuan devaluation may be temporary in nature and a September rate hike is still on the cards.
Next week features several key economic reports which could add further weight to such a view. The nature of data on housing and inflation could well hold the key to market movement in the days ahead.
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