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The Dow mopped up gains over the week, buoyed by announcements from the Federal Reserve. A decline in tensions between the United States and North Korea led to gains for the index on Monday. The index moved higher on Tuesday on speculation that the Fed would declare that it would be trimming its balance sheet. The actual announcement led to further gains on Wednesday. Ultimately, the index snapped its nine-day stretch of gains on Thursday after stocks lost their luster following the Fed’s announcement.  

Last Week’s Performance

The Dow gained 0.3% last Friday, marking its sixth consecutive session of gains. Stocks were buoyed by a rally in telecommunication and bank stocks even as investors digested another missile launch over Japan by North Korea. Bank shares surged following strong inflation numbers which came in above expectations and raised speculation of another rate hike by the Fed. Retail sales dropped 0.2% in August — the biggest decline in six months.

The index gained 2.2% last week after investor sentiment improved when the impact of Hurricane Irma was weaker than expected. The Dow also posted its biggest one-day percentage gain since Mar 1. Speaking at an investment conference, U.S. Treasury of Secretary stated that the Trump administration expects tax reforms to materialize by the year-end. Also, North Korea threatened to raze both Japan and the United States with nuclear weapons after the U.N. issued fresh sanctions against the country.

The Dow This Week

The index gained 0.3%, hitting a fresh record high as North Korea fears ebbed following U.S. Secretary of Treasury Rex Tillerson’s announcement that the United States was looking for a peaceful solution for its problems with the country. Further, investors focused on the Federal Open Market Committee’s (FOMC) two-day meeting. This gave rise to speculation that the Fed might start unwinding its $4.5-trillion balance sheet and boosted U.S. Treasury yields, leading to broad based gains for the financial sector. The index increased 0.2% on Tuesday as the two-day FOMC meeting kicked off.

Meanwhile, President Donald Trump made his debut speech at the United Nations General Assembly and urged member states to combat ‘rogue’ nations like North Korea and Iran.

The index gained 0.2% on Wednesday after the Federal Reserve announced it would begin trimming its balance sheet from October. The Fed also decided to keep benchmark interest rates unchanged, but, indicated a rate hike was likely in December. Such statements led to gains for financial shares and benefited banks.

The index lost 0.2% on Thursday, bringing to an end nine successive days of gains. During this period, the index experienced an average increase of 600 points. Stocks lost their luster after the Fed hinted that another rate hike and the unwinding of its balance sheet were in the offing before the end of the year. Shares of Apple Inc. (AAPL - Free Report) and Procter & Gamble Co (PG - Free Report) lost 1.7% and 1.9%, respectively, contributing primarily to the day’s losses for the index.

Components Moving the Index

Apple’s little snafu on stage while demonstrating the new facial recognition feature for its mega edition, iPhone X not only resulted in a wave of trolls and memes on social media but also gave competitors an opportunity to take potshots at the tech giant.

Per reports, in a Facebook (FB - Free Report) ad post, Huawei took jabs (using a clown) at iPhone X’s facial recognition by stating it fails often and people should wait for the real artificial intelligence (AI) phone coming on Oct 16, 2017. This refers to its upcoming device, Mate 10.

During Apple’s mega event on Sep 12, 2017, the company suffered a major embarrassment when the phone Craig Federighi was using to demonstrate the Face ID feature did not unlock and the software chief was forced to use the backup, which worked as it was required. (Read: Apple Mocked by Huawei as it Takes on iPhone X with Mate 10)

In another development, Zacks Rank #3 (Hold) Apple has acknowledged that its latest Apple Watch OS 3 Series has issues with cellular connectivity and assured that its engineers are working on the problem and the fix will be “soon” available with the future software release.

Apple’s comments came after several prominent reviewers lambasted the Watch for its repeated failure to connect to LTE. Apple had touted the built-in cellular as the USP of the Watch. (Read: Apple Says Watch Has Connectivity Issues, Fix in the Offing)

The Boeing Co. (BA - Free Report) has won a modification contract, worth $600 million, to provide new preliminary design activity requirements for the Presidential Aircraft Recapitalization (PAR) program. The contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH.

Per the contract, Boeing will complete preliminary design work for the modification of two 747-8 aircraft to replace the two aging VC-25A and Boeing 747-200, used as presidential support aircraft. Work is scheduled to be completed by Dec 31, 2018 and will be executed in Seattle, WA. (Read: Boeing Wins $600M Air Force Contract for PAR Program)

Additionally, Boeing announced that it has secured a $23.3 million contract from the U.S. Air Force for providing support services to the Minuteman III weapon system. Per the contract, the company will provide operations and maintenance, testing and technical data delivery support to the Minuteman III. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Johnson & Johnson (JNJ - Free Report) announced that the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) has granted a positive opinion recommending approval of its pipeline candidate, guselkumab for the treatment of moderate-to-severe plaque psoriasis in the EU. Johnson & Johnson has a Zacks Rank #4 (Sell).

The drug was approved in the United States in July this year and is marketed by the trade name of Tremfya for the treatment of this immune system related skin disorder. A decision from the European Commission (EC) is expected later this year. (Read: J&J's Psoriasis Drug Guselkumab Gets CHMP Nod in EU)

JPMorgan Chase & Co. (JPM - Free Report) recently made an undisclosed investment in Bill.com, the largest business-to-business (B2B) payments network in the United States. The move is part of the company’s efforts toward enabling its business clients do away with paper checks, and instead make and receive payments electronically.

Bill.com’s technology is likely to be integrated into Zacks Rank #3 JPMorgan’s digital system by early 2018. The association will benefit the banks’ customers by allowing them to have access to Bill.com’s network comprising almost 2.5 million users. (Read: JPMorgan Partners With Bill.com to Eradicate Paper Payments)

Pfizer, Inc. (PFE - Free Report) announced that an FDA advisory committee gave a mixed opinion regarding a regulatory application that was filed to expand the label of its cancer drug Sutent. Sutent is presently marketed for the first-line treatment of advanced renal cell carcinoma (RCC).

With the latest supplemental new drug application (sNDA), which was accepted by the FDA in May this year, Pfizer is looking to get the label extended to include use in patients with high-risk of RCC recurrence. (Read: Pfizer's Sutent Label Expansion Gets Mixed FDA Committee View)

Meanwhile, Pfizer has filed a lawsuit in a U.S. district court alleging that Johnson & Johnson is resorting to unfair practices to prevent sale of Inflectra - Pfizer’s biosimilar version of J&J and Merck & Co., Inc.’s (MRK - Free Report) blockbuster rheumatoid arthritis drug, Remicade. Pfizer’s biosimilar version is available at a Wholesale Acquisition Cost (WAC), which is 19% lower than J&J’s referenced product. (Read: Pfizer Sues J&J, Accuses it of Preventing Inflectra Uptake)

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 0.1%.

Ticker

Last 5 Day’s Performance

6-Month Performance

MMM

+2.3%

+9.5%

GS

+6.5%

-0.7%

IBM

+2.0%

-16.5%

HD

-0.3%

+8.6%

BA

+7.3%

+45.5%

UNH

-1.3%

+16.4%

MCD

-0.4%

+23.7%

TRV

+1.3%

-0.2%

JNJ

+0.6%

+3.5%

AAPL

-3.3%

+9.7%

Next Week’s Outlook

Despite gains made prior to the announcement, the Fed’s hawkish stance has ultimately robbed stocks of much of their luster. This has ended a long stretch of gains, though such a narrative is unlikely to continue much longer. Next week features the release of several crucial economic reports, including all-important GDP data. Positive signs from this front should be enough to help stocks return to their winning ways. 

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