After closing the last trading session of 2018 in the green on positive trade war developments, the index saw the worst start to a year since 2000 this week. A raft of poor economic reports intensified fears of a global economic slowdown, leading to the sour start to the year by Dow.
Last Week’s Performance
The index declined 0.3% last Friday, in keeping with last week’s wild swings. Friday’s moves followed a stunning reversal on Thursday that saw the Dow rebounding 800 points from its session low to end 260 points higher. This marked the index’s biggest intraday swing in eight years.
The index gained 2.8% last week. It was a volatile week for markets, with stocks nose-diving on Monday to record their sharpest losses in history on the eve of Christmas in a holiday-shortened session.
However, all three major indexes made a stunning comeback on Wednesday to mark the best ever post-Christmas rally in stock-market history. The Dow added 1,086.25 points, recording its biggest single-day gain.
On Thursday, stocks initially failed to hold on to the gains made in the previous session. However, indexes ended sharply higher after erasing huge losses.
The Dow This Week
The index gained 1.2% on Monday, the last day of trading in 2018 following positive developments on the trade war front. On Dec 29, President Donald Trump tweeted that he had a "very good (telephonic) call" with Chinese President Xi Jinping regarding the lingering trade dispute between the countries. He also said that progress toward a solution is “moving along very well.”
Also, Wall Street witnessed its worst monthly performance this year in December. The index lost 8.7% after experiencing its worst December since 1931 and largest monthly decline since February 2009. In the fourth quarter, the Dow shed 11.8%, marking its worst quarterly performance since the first quarter of 2009.
Despite gains in November, the Dow plunged in both October and December due to yield curve inversion, crude oil prices plunge, ambiguities over future interest rate policy and lingering tariff-related problems with China.
In 2018, Wall Street performed the worst in a decade. The index plunged 5.6%, while the Dow saw its first yearly loss in three years.
This was also the first time since 1978 that the index ended the year in the red despite gaining in the first three quarters. The Fed’s tighter monetary stance, uncertainty regarding the outcome of the U.S.-China trade war and concerns of a global economic slowdown were the primary reasons for markets’ downfall.
The index gained nearly 0.1% on Wednesday even as investors feared that global economic weakness might spill over into the United States. A spate of weak global economic data kept investors jittery. Meanwhile, investors kept a close watch on the meeting between Trump and the congressional leaders over border wall funding.
The index plunged 2.8% on Thursday, losing more than 600 points after Apple Inc. (AAPL - Free Report) suffered its largest drop in percentage terms in more than five years. Shares of Apple lost nearly 10% after it lowered its quarterly revenue projections for the first time in more than 15 years.
According to the iPhone maker’s chief executive Tim Cook, this was a direct outcome of an impending slowdown in China’s economy. This development, in turn intensified fears that the trade war would lead to a global economic slowdown.
Components Moving the Index
Apple’s shares plunged almost 8% on Jan 2 after the company cut its first-quarter fiscal 2019 guidance. Apple also warned that iPhone sales will decline on a year-over-year basis, primarily due to weak demand in Greater China and fewer upgrades to its flagship device.
The company’s previous revenue estimate between $89 billion and $93 billion was reduced to $84 billion for first-quarter fiscal 2019. Moreover, the company revised its guidance for gross margin, which is now expected to be 38% compared with the earlier range of 38-38.5%. Further, operating expenses are now expected to be $8.7 billion compared with the previous $8.7-$8.8 billion.
Notably, beginning first-quarter fiscal 2019, Zacks Rank #3 (Hold) Apple will no longer provide unit sales data for iPhone, iPad and Mac. (Read: Apple Slashes Sales Forecast for Q1, Blames China)
The Walt Disney Company (DIS - Free Report) and Verizon Communications (VZ - Free Report) recently extended their multi-year distribution agreement to carry the media giant’s channels on Verizon's Fios network. The agreement, which was renewed on the day of its deadline, ensured continued channel access to Verizon’s approximately 4.6 million customers.
Zacks Rank #3 Disney’s ability to continue partnering with pay-TV operators, at the time when media companies are facing cord cutting and decline in subscriber base, demonstrates strength of its content portfolio.
Reportedly, the media behemoth also won price hike for its programming. (Read: Disney, Verizon Extend Multi-Year Distribution Agreement)
The Boeing Company (BA - Free Report) recently secured a $400-million contract to provide recurring and non-recurring engineering services to B-1 and B-52 aircraft. The contract was awarded by the Air Force Life Cycle Management, Tinker Air Force Base, Oklahoma City, OK.
Work related to the deal will be performed in Tinker Air Force Base, OK, Edwards Air Force Base, CA, Barksdale Air Force Base, LA, and Oklahoma City, OK, and is expected to get completed by Dec 31, 2019.
Boeing's B-1 is a long-range, multi-mission, supersonic conventional bomber, which is equipped to carry eight air-launched cruise missiles or 24 SRAMs alongside carrying up to 24 nuclear bombs or 84 500-pound conventional bombs.
The Boeing B-52 primarily provides the U.S. military with immediate nuclear and conventional global strike capabilities. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Microsoft Corporation (MSFT - Free Report) has introduced Surface Go tablet in India exclusively through Bengaluru, India-based e-commerce company, Flipkart. Recently, the company commenced shipping of the device, with prices ranging from INR38,599 to INR50,999.
The different variants of the new tablet series come with storage capacity of 64 GB and 128 GB, with 4 GB and 8 GB RAM, respectively.
Notably, Surface Go was introduced by Zacks Rank #3 Microsoft in a bid to explore the low-priced tablet market to take on Apple’s budget iPads, and Alphabet’s lower-priced Chromebook.
The company had unveiled Surface Go device around Jul 10, 2018 which was made available in early August, with prices ranging from $399 to $549 in the United States.
The availability of Surface Go in India will position the company well to capitalize on the emerging EdTech market. Furthermore, the enhanced security and performance features hold promise in the growing enterprise market in the country. (Read: Microsoft Debuts Surface Go in India via Flipkart)
Visa Inc. (V - Free Report) recently announced its bid to purchase Earthport Plc for 198 million pounds or $250.6 million. The to-be-acquired company facilitates international transactions for banks and businesses. For this buyout, Zacks Rank #3 Visa’s unit Visa International Service Association has offered 30 pence for each Earthport share, which is four times Monday’s closing price.
After the offer was announced at the London Stock Exchange on Thursday, shares of Earthport skyrocketed 270%.
The Earthport stock has witnessed a downfall of 28% this year so far along with escalating costs and losses. The firm provides affordable alternatives to conventional payment systems by enabling banks and money-moving entities to have a solo alliance in place of a range of relationships worldwide.
The deal is expected to help Earthport grow and it would also benefit the firm’s employees, partners and stakeholders. (Read: Visa to Buy Earthport for Cross-Border Portfolio Boost)
Performance of the Top 10 Dow Companies
The table given below shows the price movement 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 past five trading days, the Dow has declined 2.4%.
Next Week’s Outlook
The pall of gloom which has descended on markets is not likely to disappear any time soon. Global economic slowdown fears have added to investors’ woes. In any case, trade war tensions and rate hike related concerns are likely to persist through the year. Investors are likely to be in for a rocky ride in the trading weeks ahead.
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