The blue-chip index hit record highs twice this week and ended
in the green on all days but for Tuesday. Bullish ISM Manufacturing
data pushed the Dow upward on Monday. The blue-chip index declined
on Tuesday due to investors' concerns about the outcome of the ECB
meeting. Encouraging services sector data helped the Dow make a
comeback on Wednesday.
Ultimately, the blue-chip index hit a record high once again on
Thursday, powered by ECB stimulus measures. During the first four
trading days, the Dow has gained 0.55%.
Last Week's Performance
The Dow gained a mere 0.1% on Friday following mixed economic data.
While reports on personal income and Chicago PMI numbers were
positive, personal consumption expenditure dropped in April for the
first time this year. However, benchmarks ended in the green for
the week and posted their biggest monthly gains since February.
The Dow closed in the green during the holiday-shortened week,
moving up 0.7%. Merger and acquisition activity in the food
industry, better-than-expected initial claims and expectations that
ECB will reduce key lending rates drove benchmarks higher for the
week. Encouraging economic numbers on manufactured durable goods,
improved consumer confidence and an increase in the leading measure
of U.S. home prices also lifted investor sentiment.
The blue-chip index gained 0.8% during the month of May. Gains in
small-cap and high-growth stocks drove benchmarks higher for the
month. Additionally, gains in consumer discretionary and energy
stocks helped benchmarks finish in the green. A new deal between
Keurig Green Mountain, Inc.
The Coca-Cola Company
) also provided optimism.
Federal Open Market Committee's (FOMC) indication that central bank
will remain flexible when it comes to raising short term interest
rates also boosted investor sentiment. Additionally, Federal
Reserve Chairwoman Janet Yellen indicated key lending rates would
remain low. Russian President Vladimir Putin's willingness to
discuss measures to ease the Ukrainian crisis and dovish comments
from ECB President Mario Draghi were some of the other positives
for the month.
Most economic indicators were on the positive side during May. This
includes small-business sentiment, ISM Services Index and initial
claims numbers. March's retail sales data was revised upward,
adding to the optimism.
The Dow This Week
Benchmarks scored record highs yet again on Monday following
encouraging ISM manufacturing data. Benchmarks had opened in the
red owing to erroneous manufacturing data, but they rebounded once
a correction was made which showed the index had grown at its
fastest pace this year.
The ISM reported May PMI had increased 0.5 percentage points
from April's reading of 54.9% to 55.4%. The blue-chip index closed
at a record level for the sixth time this year, gaining 0.2%.
The Dow lost 0.1% on Tuesday as investors awaited the outcome of
Thursday's ECB meeting and the monthly US jobs report on Friday.
Encouraging reports on factory orders and upbeat monthly car sales
numbers failed to boost investor sentiment. Tuesday's losses caused
the blue-chip index to retreat from the previous day's record
Investors shrugged off dismal labor market data to focus on an
encouraging services sector report on Wednesday. A report from
Automatic Data Processing, Inc.
) showed private sector hiring in May increased at the slowest pace
in four months. However, the ISM Services Index increased in May,
touching the highest level since August 2013. The Dow erased the
day's initial losses to move up by 0.1%.
The Dow gained 0.6% on Thursday, closing at a record level for the
seventh time this year. Other benchmarks also notched up record
highs on Thursday following the announcement of stimulus measures
by the ECB. The measures are intended to boost Eurozone's recovery.
The central bank reduced its key interest rates and lowered its
refinancing rate. The ECB also cut the deposit rates to minus
0.10%, thereby becoming the first central bank to have a negative
Components Moving the Index
UnitedHealth Group Inc.
) has hiked its quarterly dividend payout by 34% to 37.5 cents per
share. This affirms the U.S. health insurer's commitment to pump up
its shareholders' returns. Shareholders listed on the company's
books as of Jun 16 will receive the increased dividend on Jun 25.
The dividend hike comes on the back of UnitedHealth's strong
balance sheet with moderate leverage and its ability to generate
significant cash flows. The last concluded quarter saw a cash flow
of $1.4 billion, up 34% year over year.
) has won a deal to divest its surface care business to
construction solutions provider LATICRETE for an undisclosed price.
The transaction, which is subject to regulatory clearances and
other closing conditions, is expected to be completed in late-June
Following the takeover, LATICRETE will merge StoneTech, Stone Care
and Paver Armor Pro branded products with its existing offerings
that are already placed in professional and retail channels
) note issuance of up to $1.1 billion of unsecured debt was
assigned an Aa2 rating by Moody's along with a stable outlook.
Moody's also assigned an Aa2 rating to the company's refreshed
medium-term note (MTN) program. The unsecured notes are split
between maturities of 5 and 30 years.
Aa2 is an investment grade rating, indicating high quality
obligations with very low credit risk. The ratings are consistent
with 3M's current Aa2 senior unsecured rating and Aa2 unsecured MTN
General Electric Co.
) has been entrusted with the responsibility of building critical
infrastructure related to the railway and energy sectors in Angola
by the Export-Import Bank (Ex-Im) of the U.S.
According to Reuters, the strategic effort is likely to enable the
second-biggest oil producer of Africa to rebuild the transport,
electricity and communications networks that were ravaged by the
27-year civil war that ended in 2002. The deal financed by Ex-Im
entails General Electric to supply $650 million of energy equipment
and $350 million worth of railway machinery to Angola.
JPMorgan Chase & Co.
) has been sued by the city of Los Angeles over discriminatory
lending practices. In a case filed in the U.S. District Court for
the Central District of California, the city of Los Angeles is
seeking unspecified damages from JPMorgan owing to its engagement
in discriminatory mortgage practices since 2004.
The banking major has been accused of denying mortgages to the
minority borrowers on the same terms as others and also at times of
providing them with loans that were beyond their means to repay.
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 1.06%.
Last 5 Day's Performance
6 Month Performance
Next Week's Outlook
This has been one of the best weeks for the Dow in recent times.
The blue chip index has hit record highs twice, pushed upward for
disparate reasons. Manufacturing and services sector data has been
bullish. Additionally, investors have eagerly welcomed the ECB's
stimulus measures. If Friday's employment report lives up to
expectations, it could add to markets' optimism.
Next week has some important economic reports lined up. This
includes retail sales and initial claims data. But what is of
greater significance is whether the impact of ECB's stimulus
measures will spill over into next week. These factors will
possibly determine market direction going forward.
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JPMORGAN CHASE (JPM): Free Stock Analysis
AUTOMATIC DATA (ADP): Free Stock Analysis
3M CO (MMM): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis
UNITEDHEALTH GP (UNH): Free Stock Analysis
COCA COLA CO (KO): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
KEURIG GREEN MT (GMCR): Free Stock Analysis
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