The Dow suffered a week of lackluster volumes as investors remained wary of placing large bets ahead of the annual Jackson Hole meeting. The index’s gains on Monday were curbed by a fall in energy shares. Encouraging news on tax reforms boosted stocks on Tuesday. The index declined on Wednesday after Trump issued threats of a government shutdown and continued to suffer minor losses on Thursday.
Last Week’s Performance
The index lost 0.4% last Friday after concerns heightened over the Trump administration’s policy paralysis. U.S. equities closed off session lows after chief strategist and senior counsel to President Trump Steve Bannon exited the administration. The President’s reaction to the Charlottesville incident and the subsequent resignation of CEOs from the manufacturing councils has only amplified concerns about his ability to push through his reforms agenda.
The index declined 0.8% last week, marking its second straight weekly loss. Rumors regarding chief economic advisor Gary Cohn’s resignation dampened investor sentiment. Steve Bannon’s exit from the White House pointed to growing divisions within the Republican Party which are likely to impede Trump’s reforms agenda. Moreover, the devastating terror attack in Barcelona also weighed on the markets.
The Dow This Week
The index gained 0.1% on Monday but gains were pared by a fall in energy shares. Oil producers met on Monday to discuss diminishing OPEC compliance to production controls. However, no decision could be reached on the issue, a development which weighed on the energy shares. Also, concerns over geopolitical tensions between Pyongyang and Washington and political events in the U.S. weighed on markets.
The index gained 0.9% on Tuesday following reports that the Trump administration had made significant progress on tax reforms. All three benchmarks posted their best one-day percentage increase for the week. Also, Trump’s speech, during which he refused to withdraw U.S. troops from Afghanistan sent defense stocks higher, further boosting broader markets. The Norwegian sovereign-fund’s decision to increase exposure to global markets also boosted overall sentiment.
The index declined 0.4% on Wednesday after Trump threatened a possible government shutdown. Trump threatened to do so if Congress fails to pass legislation to approve funding for a physical wall alongside the U.S.-Mexico border to counter illegal immigration from Mexico. Trump’s comments on terminating North American Free Trade Agreement (NAFTA) also led to broad based losses. Meanwhile, investors were reluctant to place large bets ahead of the annual Symposium in Jackson Hole, resulting in low trading volumes.
The index lost 0.1% on Thursday even as trading volumes remained low ahead of the annual Jackson Hole Economic Policy Symposium. Market watchers were reluctant to place bets until the outcome of this meeting becomes known. However, small gains were experienced in afternoon trade after House Speaker Paul Ryan announced that members of the GOP are confident that Trump Administration would push through the much awaited tax reforms and also raise the debt ceiling.
Components Moving the Index
Cisco Systems Inc. (CSCO - Free Report) recently announced plans to acquire Sunnyvale-based start-up Springpath for $320 million. The company offers hyperconvergence software that enables server-based storage systems. The acquisition is expected to close in the first quarter of fiscal 2018.
Hyper-converged infrastructure (HCI) systems combine all the pieces (style storage arrays with more generic servers packed with disk and flash storage) necessary for data center computing. The acquisition will boost Zacks Rank #3 (Hold) rated Cisco’s competitive position in the HCI market. (Read: Cisco Buys Springpath, Software-Centric Transition Continues)
The Boeing Co. (BA - Free Report) secured a $349.2 million contract for Ground-Based Strategic Deterrent (GBSD). Work related to the deal is scheduled to be over by Aug 20, 2020.
The contract was awarded by the Air Force Nuclear Weapons Center, Hill Air Force Base, UT. Per the terms of the agreement, Boeing will deliver an affordable total system replacement of Minuteman III missile to meet intercontinental ballistic missiles operational requirements. Work will be carried out in Huntsville, Al, and various other locations. (Read: Boeing Clinches $349M Deal to Upgrade Minuteman Missiles)
Additionally, Zacks Rank #2 (Buy) rated Boeing has clinched a modification contract for eight CH-47F new build helicopters. The deal aims to support the Royal Saudi Land Forces Aviation Command (RSLFAC).
Valued at $222.5 million, the contract has been awarded by the U.S. Army Contracting Command Redstone Arsenal, Redstone Arsenal, AL. Work related to this deal is scheduled to be over by Jul 30, 2021 and will be carried out in Ridley Township, PA. (Read: Boeing Wins $223M Navy Deal for CH-47F Helicopters)
Caterpillar Inc. (CAT - Free Report) reported 12% rise in sales in July, its best performance so far in 2017 thanks to continuing improvement in Asia Pacific and a turnaround performance in Resource Industries. The company witnessed improvement in all regions in July, the first time this year. Overall performance continued to be led by Asia Pacific with a 45% rise.
The Asia Pacific region has been a consistent performer for Caterpillar since it posted the first positive reading in August 2016. The company has since then witnessed a growing trend in sales in the region with growth graph steadily picking up steam. Sale improved 10% in Latin America and 4% in North America. Sales went up 5% in Europe, Africa and Middle East (EAME) after suffering declines in the first six months. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here .
International Business Machines Corp. (IBM - Free Report) has taken another major step to strengthen its foothold in the blockchain market. The company recently announced a major blockchain collaboration with a consortium of food suppliers including Dole, Driscoll’s, Golden State Foods, The Kroger Co. (KR), McCormick, McLane, Nestlé, Tyson Foods, Inc. (TSN), and Unilever.
The setup is aimed at providing unaltered information to all members of the food supply ecosystem regarding the origin and the state of the food. The consortium along with Zacks Rank #3 IBM will work together for the betterment of blockchain applications in the global food supply industry. (Read: IBM Signs Blockchain Agreement With Global Food Suppliers)
Wal-Mart Stores, Inc. (WMT - Free Report) announced on Wednesday that the company will partner with Alphabet Inc.’s (GOOGL) Google to give shoppers the ability to order thousands of products through Google Express using voice-activated shopping.
Zacks Rank #3 rated Wal-Mart’s customers can soon link their Wal-Mart accounts directly to Google Express, Google’s online marketplace. Once customers link their Wal-Mart accounts to Google Marketplace, they can order items quickly through Google Home using their voice or by shopping online. (Read: Walmart Enters Voice Shopping With Google to Take On Amazon)
Chevron Corporation’s (CVX - Free Report) CEO John Watson is planning to step down, as per media reports. This change of guard comes when the company is seeking managerial changes to deal with the volatile dynamics of the oil industry.
Zacks Rank #3 Chevron is expected to announce the transition next month and the company’s vice chairman Michael Wirth is highly anticipated to replace Watson as the new CEO. (Read: Chevron's CEO Watson Likely to Step down, Wirth to Take Over)
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 gained 0.3%.
Last 5 Day’s Performance
Next Week’s Outlook
With the earnings season behind us, events at the White House are likely to keep investors worried. Meanwhile, market watchers are focused on the outcome of the Jackson Hole meeting, looking to gather clues about the likelihood and timing of the next rate hike. Only if next week’s crucial economic reports, including GDP, come in positive can markets hope to return to the path of steady gains.
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