The Dow endured a difficult week as geopolitical tensions in
Ukraine weighed on indices. The blue-chip index started the week on
a positive note, riding on positive earnings results and a rescue
announced by Portugal's central bank. However, the Dow declined on
Tuesday as the Ukraine crisis eroded all of Monday's gains.
The blue-chip index finished marginally higher on Wednesday even
as two major merger deals failed and the Ukraine crisis
intensified. But the Dow declined again on Thursday after tensions
in the Middle East and Ukraine offset positive economic data. The
Dow has lost 1.21% during the first four trading days.
Last Week's Performance
The Dow dropped 0.4% last Friday after concerns about the timing of
a rate hike by the central bank rates kept investors jittery. The
blue-chip index registered its biggest weekly drop since Jan 24.
Friday's largely positive economic data could only lift the stocks
momentarily as concerns from Thursday over a spike in US labor
costs and a credit default by Argentina continued to weigh on
Investors remained concerned about wage inflation, since
economic growth has been robust. Fears arose that such an increase
might lead to a rise in federal funds rate sooner than anticipated.
For the week, the blue-chip index dropped 2.8%, posting its biggest
weekly drop since the week ended Jan 24. Benchmarks suffered
their biggest losses in months on Thursday, following a default by
Argentina, and a spike in US labor costs. Indices were also
affected after the U.S. and the European Union expanded economic
sanctions against Russia.
The Federal Open Market Committee (FOMC) stuck to its plan of
steadily wrapping up the quantitative easing program. The Federal
Reserve said the rate hike may take "considerable time" after the
end of its bond buying program.
Investors also assessed Fed's mixed view on the economy. The FOMC
indicated that the economy has shown significant improvement in the
second quarter as most of the economic indicators were on track.
However, FOMC also said the labor market is facing problems of
underutilization and the pace of recovery of the housing sector is
On the economic front, pending home sales data was discouraging. A
gauge of pending home sales numbers retreated in June after three
consecutive months of solid growth. Positive second-quarter GDP,
encouraging private sector hiring reports and upbeat consumer
confidence data failed to lift the markets.
The Dow This Week
Benchmarks ended in the green on Monday buoyed by upbeat earnings
results and announcement of a rescue plan by Portugal's central
bank. The Dow halted its four-day losing streak, gaining 0.5%.
Markets were also boosted by steps to combat Portugal's banking
crisis. On Sunday, Portugal's central bank announced a rescue plan
of Banco Espírito Santo (BES). BES had incurred loss of €3.58
billion in first half of 2014. This is the biggest loss in
Portuguese banking history. However, weakness in the utilities
sector offset some of the gains.
The Dow lost 0.8% or 139.81 points on Tuesday to settle in the red
zone following reports that Russia has increased forces along its
border with Ukraine. This three-digit decline eroded all of
Monday's gains. Investors' apprehensions about a rate hike
following strong economic data also weighed on markets. Positive
data on the ISM Services Index and new orders for manufactured
goods lifted the markets in the initial hours. However, gains were
eroded as investors grew apprehensive about the prospect of a rate
Benchmarks ended almost unchanged on Wednesday as tensions between
Russia and Ukraine escalated and two high-profile merger deals
failed. Russia is imposing restrictions on food imports from the
U.S. and Europe.
Disappointing economic data from Europe also weighed on investor
sentiment. Italy's second quarter GDP data indicated the country
had once again receded into a recession. Meanwhile, Germany's
manufacturing numbers declined. Industrial production output in the
United Kingdom increased by a paltry 0.3% (month on month). These
negative numbers indicate that growth in the major Eurozone
economies are slowing down. Despite these factors, the Dow gained
The Dow declined 0.5% on Thursday as geopolitical tensions in
Ukraine and Middle East offset upbeat earnings and weekly jobs
data. NATO's Secretary General and Ukrainian Prime Minister Arseny
Yatseniuk discussed a potential alliance to support Ukraine in its
conflict with pro-Russian separatists.
Meanwhile, the US is reportedly contemplating airstrikes against
the Islamic State in Iraq and Syria (ISIS). Decelerating growth in
European economy also dented investor sentiment. After adding
almost 61 points in the initial hours, the Dow declined to its
lowest level since April.
Components Moving the Index
) reported strong second quarter results on higher
, partially offset by falling production.
Earnings per share came in at $2.98, well above the Zacks Consensus
Estimate of $2.68 and also improved from the year-ago profit of
$2.77 per share. The company's quarterly revenues increased 1% year
over year to $57,938 million, outperforming the Zacks Consensus
Estimate of $54,588.
Chevron's total production of crude oil and natural gas decreased
by 1.4% from the year-earlier level to 2,545 thousand
oil-equivalent barrels per day (MBOE/d).
Though the U.S. output augmented 1.2% year over year, Chevron's
international operations (accounting for 74% of the total)
registered a 2.3% fall in volumes.
Chevron's downstream segment achieved earnings of $721 million,
lower than the profit of $766 million last year.
The Procter & Gamble Company
) reported mixed fiscal fourth-quarter 2014 results. P&G's
fourth-quarter adjusted earnings (excluding restructuring cost and
charges for European legal matters) of 95 cents per share beat the
Zacks Consensus Estimate of 91 cents. Earnings increased 20%
despite currency headwinds of 4 cents. Excluding currency
headwinds, earnings increased 25%.
However, P&G's net sales declined 1% to $20.16 billion due to
currency headwinds and negative impact of divestitures. Top line
narrowly missed the Zacks Consensus Estimate of $20.397 billion.
Fiscal 2014 revenues dropped 1% to $83.1 billion, missing the Zacks
Consensus Estimate of $83.51 billion. The top-line increase was in
line with management's expectation. Organic sales grew 3%, at the
lower end of the company's guidance range of 3% to 4%.
Core earnings per share are expected to grow in a mid-single digit
range in fiscal 2015. Net revenue growth is expected in the low
single-digit range. Currency is expected to hurt revenues by 1%.
However, organic sales are expected to increase in low-to-mid
The Walt Disney Company
) reported record third-quarter fiscal 2014 earnings. The company's
earnings came in at $1.28 per share, ahead of the Zacks Consensus
Estimate of $1.17 and jumped 24% year over year.
Revenues came in at $12,466 million, up 8% year over year.
Moreover, it surpassed the Zacks Consensus Estimate of $12,162
million. Total segment operating income increased nearly 15% to
$3,857 million, based on strong performance across all divisions,
particularly Studio Entertainment and Interactive segments.
Studio entertainment revenues rose 14% to $1,807 million.
Interactive revenues for the quarter rose 45% to $266 million.
Consumer products revenues increased 16% to $902 million. Media
networks revenues increased 3% year over year to $5,511 million.
This was attributable to a 1% rise in cable networks revenues to
$3,942 million and 7% rise in broadcasting revenues to $1,569
million during the quarter. Parks and Resorts revenues rose 8% to
United Technologies Corp.
) unit UTC Aerospace Systems won a contract extension from
The Boeing Company
) to design and manufacture nacelle systems for the 787 Dreamliner
UTC Aerospace also signed a Comprehensive Accessory Repair and
Exchange (C.A.R.E.) program agreement for the Dreamliner fleet of
Scoot Pte. Ltd., a Singapore-based low-cost long-haul airline.
Per the contract, UTC Aerospace's Aerostructures unit will build
the aerodynamic framework that will surround the jet engine for
787-10, the next variant in the Dreamliner series. Nacelle systems
will be built for both the GE Aviation GEnx and Rolls-Royce Trent
1000 engine variants.
Additionally, UTC Aerospace will provide aftermarket support for
the 787-10 nacelle systems through its worldwide network of MRO
(maintenance, repair and overhaul) facilities and spares.
General Electric Company
) recently offered an overview of its long-term investment plans in
General Electric intends to focus its investment on three strategic
areas: infrastructure development, localized solutions and capacity
building. The distributed power business of the company further
extended its commitment to bring online 5,000MW of new electric
generation capacity across six countries in association with the
regional private and public sector players.
General Electric's "Country-to-Company" agreement with the
government of Nigeria will continue to develop infrastructure
projects while transferring skills and technology to local talents.
The company will also supply $650 million of energy equipment and
$350 million worth of railway machinery to Angola. General Electric
will invest $20 million over the next five years in health programs
in Nigeria, Kenya, Ghana, Rwanda, Uganda, Malawi and Tanzania.
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 lost 1%.
Last 5 Day's Performance
6 Month Performance
Next Week's Outlook
International factors have guided stocks over the week. They
have dragged down indices on all days, but for Monday, when a plan
to rescue Portuguese Bank BESlifted stocks. The crisis in Ukraine
has weighed on markets for some time now. Dismal economic data from
Europe have added to international headwinds. Tensions in the
Middle East could also have a major impact on the markets in the
Since most major companies have already released earnings
figures, domestic economic data will now gain prominence. Next week
has some key reports lined up. This includes reports on retail
sales, business inventories, inflation and industrial production.
If these are largely positive in nature, they could help stocks
endure international tensions.
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CHEVRON CORP (CVX): Free Stock Analysis Report
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