The Dow had an excellent week, driven upward primarily by
positive economic data. New deals and bullish consumer confidence
data boosted the blue-chip index higher on Monday. Encouraging
housing data and upbeat earnings results helped the Dow post gains
The blue chip index managed to pare losses on Wednesday,
following a choppy session after Fed minutes revealed differing
views on the timing of a rate hike. A host of positive economic
reports helped the Dow post gains once again on Thursday. The Dow
has gained 1.2% during the first four trading days.
Last Week's Performance
The Dow dropped 0.3% last Friday after renewed tension between
Ukraine and Russia unnerved investors. Benchmarks reversed initial
gains after Ukraine forces destroyed part of a Russian armored
column after it entered Ukrainian soil. The incident unnerved
investors as they took money out of equities and parked them into
safe-haven assets. Economic data came in mixed on Friday.
Industrial production rose 0.4%, while PPI increased 0.1% in July.
For the week, the blue-chip index increased 0.7%. Benchmarks had
gained last Monday following hopes that tensions between Russia and
Ukraine would recede. On Thursday, Russian President Vladimir
Putin's comments eased concerns related to geopolitical tensions.
Positive earnings results, gains in biotech stocks, ceasefire
agreement in Gaza and subdued Chinese inflation data also boosted
the markets. Downbeat European growth numbers, discouraging retail
sales numbers and disappointing Germany's investor confidence data
were some of the negatives for the week.
The Dow This Week
New deals, upbeat homebuilder confidence data and easing tensions
between Russia and Ukraine handed markets strong gains on Monday.
The NAHB/Wells Fargo Housing Market index rose 2 points to 55 in
August, hitting its highest level in seven months. Homebuilder
sentiment also rose for the third straight month in August. The
blue-chip index registered its biggest one-day percentage gain
since Aug 8, increasing around 1.1%.
The Dow gained 0.5% on Tuesday following encouraging housing data
and upbeat earnings results. Housing starts surged 15.7% in July.
Construction on new U.S. homes touched the highest level in July
since Nov 2013. Building permits also increased 8.1% from June.
Strong earnings results from The Home Depot, Inc. (
) were welcomed by investors. Home Depot advanced the most among
the Dow components. The positives offset negative sentiment arising
from ongoing geopolitical tensions in Ukraine.
Benchmarks finished a choppy session on a mixed note on Wednesday
after Fed minutes showed officials had differing views about the
timing of rate hike. The Dow finished in the green for the third
straight day after it was able to pare losses following jitters
from the Fed minutes.
Fed minutes showed some Fed officials were in favor of
tightening monetary policy. They debated the timing of a rate hike
following a recovery in the job market and pickup in inflation.
However, there were other Fed officials who contradicted these
views and sought further indications before deciding on hiking
federal funds rate. The blue chip index gained almost 0.4%.
The Dow gained nearly 0.4% to close at its best level since Jul 24
on Thursday. Economic data on manufacturing, existing home sales,
initial claims and leading economic indicators all came in
positive. Existing home sales rose for the fourth consecutive month
in July. The metric increased 2.4% touching the highest level since
The Philadelphia Federal Reserve's manufacturing index surged to
its highest level in August since Mar 2011. Additionally, claims
for unemployment benefits declined in the week ending Aug 16.
Meanwhile, investors waited for what Janet Yellen and Mario Draghi
have to say at Jackson Hole, Wyo on Friday.
Components Moving the Index
The Home Depot Inc.
reported year-over-year improvement in its financial results for
the second quarter of fiscal 2014. The company's adjusted earnings
of $1.52 per share jumped 22.6% from the year-ago quarter's
earnings of $1.24 and surpassed the Zacks Consensus Estimate of
This strong performance was primarily driven by the recovery in its
spring season sales as well as strength in its core store
activities and in all geographies. Net sales increased 5.7% to
$23,811 million year on year and beat the Zacks Consensus Estimate
of $23,570 million.
The company's overall comparable store sales (comps) increased 5.8%
while comps in the U.S. stores grew 6.4%. The year-over-year
improvement in top-line was mainly attributable to a 4.2% rise in
the number of customer transactions and an increase of 1.8% in
average ticket size.
Home Depot reaffirmed its sales growth outlook of 4.8% for fiscal
2014. However, the company raised its diluted earnings per share
growth guidance for the fiscal to 20.2% from the earlier
anticipated growth of 17.6%.
Wal-Mart Stores Inc.
) shares went down 1% after it lowered its fiscal guidance.
However, the company posted in-line earnings and
Walmart's fiscal second quarter 2015 adjusted earnings of $1.21 per
share matched the Zacks Consensus Estimate. However, earnings
declined 1.6% from the year-ago earnings of $1.23 per share due to
soft comps in the U.S. and Sam's Club and a decline in operating
income. Earnings were within management's guidance range of $1.15
and $1.25 per share.
Total revenue of the retailer increased 2.8% to $120.1 billion
(including membership and other income) and beat the Zacks
Consensus Estimate of $119.1 billion. The better-than-expected
sales were encouraging as the company delivered weak results in the
past five quarters due to a tough economic environment.
For the third quarter of fiscal 2015, Walmart expects its adjusted
earnings to range between $1.10 and $1.20 per share, lower than
last year's earnings of $1.24 per share. Walmart expects U.S. comp
sales to be relatively flat for the 13-week period ending Oct 31,
as against a decline of 0.3% last year.
) recently released WindUp for Windows Phone, an app that allows
users to share messages, photos and videos, which are automatically
deleted at a time preset by the user.
The app has reportedly been touted as a prospective competitor to
Snapchat, which is still not available on the Windows Phone
platform. However, Microsoft denied the reports, claiming that the
app is a prototype launched on Windows Phone Store for only
The WindUp app can be downloaded free by users of Windows Phone 8
or 8.1 to exchange self-destructive temporary messages, photos and
videos where users can select a time depending on how long they
want their message to last.
United Technologies Corp.
) signed a licensing agreement with CGTech to integrate its
PromptFM machining process optimization technology into the
latter's VERICUT cutting process software. The combination is
expected to enhance productivity for machining equipment operators,
with applications in a wide spectrum of industries. The financial
details of the agreement were kept under wraps.
CGTech specializes in computer numerical control (CNC) simulation
software for manufacturing. Its flagship product, VERICUT software,
has become the industry standard for simulating CNC machining.
United Technologies' PromptFM, designed specifically to ensure
compatibility with VERICUT.
The Goldman Sachs Group, Inc.
) stopped its attempt to dispose a $1billion lawsuit filed by the
Libyan Investment Authority (LIA), a sovereign wealth fund at
London's High Court. The company earlier looked for a summary
judgment on the suit, but finally pulled its request back.
The lawsuit, filed in Jan 2014, pertained to dealings made by the
company with the LIA in the earlier part of 2008. These had led to
substantial losses for the sovereign fund. Eventually, it became
apparent that Goldman had taken undue advantage of the trust LIA
had placed on the Wall Street giant.
Goldman applied for the summary judgment request in Apr 2014 as it
believed that the chances of LIA's success in a trial were dim.
However owing to the withdrawal of its request, Goldman will face a
court hearing, which is scheduled in early October. The company
believes that "the case is entirely without merit."
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 1.7%.
Last 5 Day's Performance
Next Week's Outlook
A number of positive economic reports were released this week
which helped the Dow notch up substantial gains. Data on housing,
manufacturing, initial claims and leading economic indicators all
came in positive. New deals and positive earnings also contributed
to the gains over the week. The only jarring notes were differing
views from the Fed on the timing of a rate hike and tension on the
As expected, with the earnings season winding down, economic
reports have taken center stage and are guiding markets. Next week
also has several key economic reports lined up. Data on housing,
consumer confidence, durable orders and personal consumption are
scheduled for release.
Additionally, the end of the week features the all-important GDP
report. It is quite probable that next week will also largely be
guided by economic data. Any good news on this front could see
stocks trending even higher.
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WAL-MART STORES (WMT): Free Stock Analysis
HOME DEPOT (HD): Free Stock Analysis Report
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