The index suffered a particularly dismal week, weighed down by surging bond yields. Worries about slowing global growth also plagued investors after the IMF cut global forecasts. Lingering trade tensions between the United States and China also made their presence felt. Shares of tech majors also suffered sharp reverses.
Last Week’s Performance
The index lost 0.7% on last Friday as concerns over rising Treasury yields overshadowed impressive jobs data. Although the number of job gains for September came in below expectations, the unemployment rate fell to 3.7%, its lowest level since 1969.
However, the 10-year Treasury yield advanced 2.4 basis points to 3.24%, touching its highest level since 2011, overshadowed positive jobs data. Losses were led by industrials and technology stocks. Shares of Caterpillar Inc. (CAT - Free Report) and Intel Corporation (INTC - Free Report) declined 2.2% and 2.3%, respectively.
The index declined 0.4% over last week, registering its second straight weekly decline. The week started on a high with a new trade deal replacing NAFTA. However, trade war worries continued to make investors jittery, with markets ending mixed mid-week.
Markets got a boost helped by a rally in energy stocks after crude oil prices rose. But yields were on the rise amid strong economic data. This saw markets ending in the red during the last two sessions of the week.
The Dow This Week
The index advanced 0.2% on Monday. Though, the Dow closed in the green for the first time in three days but gains were kept in check on growing concerns of rising interest rates. The 10-year Treasury Yield rose to 3.23% from 3.06%, reaching its highest level since the last week of 2011. Gains were led by Walgreens Boots Alliance, Inc. (WBA - Free Report) . Shares of the company increased 2.3%.
The index lost 0.2% on Tuesday as investors continued to worry about rising interest rates and higher bond yields. Also, fears of slowing global economic growth dented investor sentiment after the IMF cut global growth forecasts for 2018 and 2019. Shares of United Technologies Corporation (UTX - Free Report) and DowDuPont Inc. (DWDP - Free Report) declined 2.7% and 3.7%, respectively.
The index plummeted 3.2% on Wednesday shedding 831.33 points in its worst daily decline since Feb 8. Concerns about rapidly rising interest rates continued to plague investors. The 10-Year Treasury yield rose to around 3.23%, after hitting its highest level since 2011. Also the two-year yield reached its highest mark since 2008.
Fears about slowing global growth also continued to worry investors. Meanwhile, tech stocks declined sharply. Shares of Intel Corporation (INTC - Free Report) and Microsoft Corporation (MSFT - Free Report) lost 3.8% and 5.4%, respectively.
The index declined 2.1% on Thursday as worries about rapidly rising interest rates and a slowdown in global economic growth continued to make investors jittery. Also, trade tensions dented investor sentiment ahead of the earnings season kickoff.
The Dow gave up 545.91 points, bringing its two-day losses to 1,378 points. The index fell as much as 698.97 points at one time before bouncing back on reports that President Donald Trump and Chinese president Xi Jinping would meet at next month’s G-20 summit. Shares of Intel lost 1.3%.
Components Moving the Index
United Technologies has announced that it is rewarding shareholders in the form of a hike in the quarterly dividend rate. Such shareholder-friendly policies of the company reflect a strong cash position and its potential to improve profitability in the months ahead.
As revealed, Zacks Rank #2 (Buy) United Technologies’ board of directors approved 5% or 3.5 cents per share hike in the quarterly dividend rate, which moved from 70 cents to 73.5 cents. On an annualized basis, the dividend increased to $2.94 from the earlier rate of $2.80 per share.
This move marks the third consecutive increase in quarterly dividend rate. The company will pay the revised quarterly dividend on Dec 10, 2018, to shareholders of record as of Nov 16. (Read: United Technologies' Board OKs 5% Hike in Dividend Rate)
Walgreens Boots reported adjusted earnings per share (EPS) of $1.48 for fourth-quarter fiscal 2018, up 12.9% year over year (same at constant exchange rate). The figure surpassed the Zacks Consensus Estimate of $1.44.
On a reported basis, net earnings came in at $1.5 billion, reflecting an 88.5% surge from the prior-year quarter. Reported EPS came in at $1.55, up 103% on a year-over-year basis.
Full-year adjusted EPS was $6.02, reflecting an 18% rise from the year-ago period. The figure also surpassed the Zacks Consensus Estimate of $5.98 per share.
Zacks Rank #2 Walgreens Boots recorded total sales of $33.44 billion in the fiscal fourth quarter, up 10.9% year over year and 11.3% at constant exchange rate or CER. However, the top line missed the Zacks Consensus Estimate of $33.64 billion.
For the full year, the company reported revenues of $131.53 billion, an 11.3% improvement from the year-ago period. However, the reported figure lagged the Zacks Consensus Estimate of $131.60 billion. (Read: Walgreens Q4 Earnings Top Estimates, Revenues Lag)
Johnson & Johnson (JNJ - Free Report) announced new data from a phase III study, evaluating its drug Stelara in adults with moderate-to-severe ulcerative colitis (“UC”). The eight-week induction data from the pivotal phase III UNIFI study showed that a single intravenous (IV) dose of the medicine induces clinical remission and response in UC patients who had failed prior therapy.
The data from UNIFI showed that after eight weeks of treatment, clinical remission was achieved in 15.6% of UC patients who received the 130 mg dose of Stelara and 15.5% of patients receiving the 6 mg/kg dosing compared to 5.3% for those receiving placebo.
The secondary endpoints included the proportion of patients in clinical response, endoscopic healing, as well as improvement in health-related quality of life. The stock has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Boeing Company (BA - Free Report) recently secured a contract to remanufacture eight and procure nine new-build Apache AH-64E aircraft. Work related to the deal is scheduled to be completed by Feb 28, 2023.
Valued at $242.1 million the contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, Alabama. Boeing will carry out the task in Mesa, AZ. (Read: Boeing Wins $242M Deal to Build Apache AH-64E Aircraft)
The subsidiary of United Launch Alliance (“ULA”) — a joint venture (JV) between Lockheed Martin Corp. (LMT - Free Report) and Zacks Rank #3 (Hold) Boeing recently secured a contract involving the Evolved Expendable Launch Vehicle (EELV) program. Per the terms of the agreement, United Launch Services, LLC (“ULS”) — the subsidiary — will develop a Launch System Prototype for the EELV program.
Valued at $967 million, the contract was awarded by the Launch Systems Enterprise Directorate, Space and Missile Systems Center, Los Angeles Air Force Base, California. Work related to the deal is scheduled to be completed by Mar 31, 2025 and will be executed in Centennial, CO and Decatur, AL. (Read: Boeing Wins $242M Deal to Build Apache AH-64E Aircraft)
JPMorgan Chase & Co. (JPM - Free Report) plans to cut nearly 400 positions in its consumer home lending division. This news was first reported by the Wall Street Journal. JPMorgan has a Zacks Rank #3.
The bank is laying off employees in three states — Florida, Arizona and Ohio. Particularly, the cities including Jacksonville, Phoenix, Cleveland and Columbus are expected to face the cuts. Notably, the layoffs account for nearly 2% of JPMorgan’s consumer home lending division. (Read: JPMorgan to Trim Mortgage Banking Division, Slash 400 Jobs)
Walmart Inc. (WMT - Free Report) is apparently eyeing a collaboration with Metro Goldwyn Mayer (or MGM) to boost viewership of Vudu, which was acquired in 2010 in response to sluggish DVD sales. Walmart has a Zacks Rank #3.
Sources revealed that this omni-channel retailer is planning to team up with movie studio MGM to produce content exclusively for Vudu, which is its video-on-demand service. Per the deal, content created by MGM will be more family-oriented, and will premiere solely on Vudu. (Read: Walmart Sharpens Digital Edge, Plans to Enhance Vudu Services)
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 plummeted 4.9%.
Next Week’s Outlook
In keeping with equity markets’ historical performance in October, this was one of the most dismal weeks for stocks in recent times. Surging bond yields led to heightened concerns about an increase in borrowing costs. Tech stocks suffered a grievous decline, leading to losses for broader markets.
Meanwhile, lingering trade tensions refuse to recede. Though evidence of a rebound is emerging from stock futures, multiple concerns could continue to plague investors. Given such a scenario, investors will increasingly focus on positive economic reports for impetus in the days ahead.
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