The Dow traversed a particularly difficult holiday-shortened week. A steady slide in tech and Internet-related shares was one of the primary reasons for massive losses. Weakness in energy shares also contributed to reversals over the first two trading days. The index closed flat on Wednesday following a recovery in energy shares. Markets were closed on Thursday for the Thanksgiving Day holiday.
Last Week’s Performance
The Dow gained 0.5% last Friday as President Donald Trump’s comments renewed hopes that trade disputes with China would be resolved in the near term. This gave a boost to investors’ confidence helping the blue-chip index notch up gains. The Dow gained as much 221 points at one time of the day. Shares of Caterpillar Inc. (CAT - Free Report) gained 0.4%.
However, the index lost 2.2% over last week. Stocks posted sharp weekly losses, led by a decline in tech stocks. Also, markets were hit as crude oil prices continued their downward journey.
Growing concerns among investors that banks will face tighter regulations once Democrats take control of the House of Representatives added to the losses. Tech stocks were the second-worst performer of the week, declining 2.5%, with shares of most tech giants taking a hit.
The Dow This Week
The index declined 1.6% on Monday as tech and Internet-related stocks took a hit. The huge selloff was led by FAANG stocks that dragged the broader market lower. Also, homebuilder confidence hit a two-year low in November, hurting markets further.
Also, investors continued to be cautious ahead of scheduled talks between President Donald Trump and Chinese president Xi Jinping on the sidelines of the G-20 summit to be held in Buenos Aires later this month.
The index lost 2.2% on Tuesday, entering the negative zone for the year. Apple, Inc.’s (AAPL - Free Report) shares once again declined, falling 4.8%. The Dow was up 1.2% for 2018 entering Tuesday.
Tech and Internet-related companies, which have been suffering for a while now, once again took a hit, fueling worries of slowing global economic growth. However, the selloff now seems to have spread to the broader market, with retail and energy stocks contributing to the carnage.
The index closed almost flat on Wednesday, reversing its two-day rout. However, at its session high, the blue-chip index was up 204.15 points. A partial recovery for energy stocks, which have been the worst performers recently, boosted broader markets. However, trading was highly volatile as all three major stock indexes lost most of their gains due to precipitous decline of Apple’s shares.
Shares of Apple declined 0.1% marking its eighth negative close over the past 10 trading days. The stock closed at $176.78 from an intraday high of $180.27. Notably, the tech-behemoth is currently in bear market territory. At the close, shares of Apple were down 23.6% from its recent peak recorded on Oct 3. Markets were closed on Thursday for the Thanksgiving Day holiday.
Components Moving the Index
The Boeing Co. (BA - Free Report) has received an order to supply 40 737 MAX 8 airplanes to Jeju Air. These new aircraft will help the Korea-based low cost airline to expand its operation and meet the rising demand from customers. The agreement also includes purchase rights for another 10 737 MAX 8 airplanes.
The total value of the 40 airplanes will be $5.9 billion at list prices. We expect Jeju Air to get a discount on the list prices, as Zacks Rank #2 (Buy) Boeing has historically offered discounts on bulk orders.
Jeju Air already has 40 Next-Generation 737-800s, and these new aircraft will help the company to further expand its domestic and international operations. (Read: Boeing to Supply 40 737 MAX 8 to Jeju Air, Orders Rise)
Microsoft Corporation (MSFT - Free Report) is leaving no stone unturned to integrate robust conversational artificial intelligence (“AI”) capabilities across its portfolio. The company’s focus on making the utilization of AI easy and available for enterprises is in sync with the acquisition of XOXCO. However, the financial terms of the deal have been kept under wraps. Microsoft has a Zacks Rank #2.
XOXCO which is based out of Austin, TX was founded in 2008. In 2015, it reportedly raised $1.5 million in a bid to focus on chatbot development. XOXCO created the first bot, named Howdy enabling Slack’s chat app users to schedule meetings. XOXCO’s Botkit is one of a kind development kit enabling developers on GitHub to design bots. (Read: Microsoft to Buy XOXCO, Expand Conversational AI Portfolio)
Johnson & Johnson’s (JNJ - Free Report) subsidiary, The Janssen Pharmaceutical Companies announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) issued a positive opinion for apalutamide, a next-generation oral androgen receptor inhibitor, for the treatment of adult patients with non-metastatic castration-resistant prostate cancer (nmCRPC), who are at high risk of developing metastatic disease.
In February 2018, the FDA approved apalutamide for the treatment of men with nmCRPC. Apalutamide is marketed under the trade name of Erleada. The CHMP’s positive opinion is based on data from the pivotal SPARTAN phase III study. The data from the study showed that Erleada (apalutamide) significantly reduced the risk of metastatis or death by 72% and increased median metastatis-free survival by more than two years in patients with nmCRPC. The stock has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chevron Corporation (CVX - Free Report) recently declared the commencement of production from its Big Foot deepwater project in the U.S. Gulf of Mexico (GoM). The field — first brought to light in 2006 — is expected to hold more than 200 million oil-equivalent barrels of recoverable resources. The production site, at a water depth of around 1,584 meters, is located 360 kilometers south of New Orleans. The Big Foot field has an estimated production life of 35 years.
Zacks Rank #3 Chevron is using a 15-slot drilling and production tension-leg platform at the site, which has a production capacity of 25 million cubic feet of natural gas and 75,000 barrels of oil per day. Production from the site began on time, as expected by the company. This will likely enable Chevron to achieve its 2018 production growth target of 7%. The $4-billion deepwater project was sanctioned during 2010-end. (Read: Chevron Commences Production From Big Foot in GoM)
Pfizer Inc. (PFE - Free Report) announced that the FDA has approved its once-daily oral medicine, glasdegib, for the treatment of newly-diagnosed acute myeloid leukemia (AML). The drug, to be marketed by the trade name Daurismo, is approved in combination with low-dose cytarabine (LDAC), a kind of chemotherapy treatment for patients aged 75 years and older or who cannot take intensive chemotherapy. Pfizer has a Zacks Rank #3.
Daurismo was reviewed and approved under the FDA’s priority review program. Following the same, Daurismo becomes the first and the only approved Hedgehog pathway inhibitor for treating adult patients with AML. However, the drug has not been studied on patients suffering liver and severe kidney diseases. (Read: Pfizer's FDA Nod for Cancer Drug is Four in a Row in 90 Days)
Apple is steadily building its film slate with back-to-back deals for its upcoming streaming service. Reportedly, the company has entered into a multi-year partnership deal with Oscar-winning indie studio, A24.
The latest deal follows Apple’s acquisition of global distribution rights for two “family-focused movies,” Wolfwalkers and The Elephant Queen in September. Although it is not an exclusive deal, A24 will produce multiple movies for Zacks Rank #3 Apple. However, details of the transaction were not revealed. (Read: Apple Partners with A24 Studio to Strengthen Content Portfolio)
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 slumped 2.8%.
Next Week’s Outlook
Markets are passing through difficult times with analysts debating whether another correction is around the corner. Some have even opined that we are currently witnessing a “rolling bear market.” Steady losses for tech shares are not helping matters. Investors will look toward strong economic data and a recovery in energy shares for solace in the trading week ahead.
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