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Dow 30 Stock Roundup: Microsoft, Exxon Beat on Earnings, Chevron Incurs Loss

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The Dow experienced a mixed week guided once again by the fortunes of oil prices . The index declined on Monday following a decline in oil prices and disappointing economic data from China. The index fell again on Tuesday as oil prices continued to decline.

The index advanced on Wednesday following a strong rebound in oil prices. The Dow increased on Thursday due to strong gains in materials and industrials stocks. The Dow has declined over the first four trading days, losing 0.2%.

LastWeek's Performance

The index added 2.5% on Friday after the Bank of Japan lowered its key interest rate into negative territory in order to boost its economy. BOJ announced that it has cut the key rate to -0.1% on excess reserves to ensure 2% inflation "at the earliest possible time." Meanwhile, shares of Microsoft Corp. MSFT surged 5.8% after reporting better-than-expected quarterly earnings.

Crude prices increased again on Friday, after possibilities of a deal between major oil producers surfaced. Additionally, Energy Information Administration of the U.S. stated that the country's oil output declined in November. Further, Baker Hughes reported a fall in weekly U.S. oil rig count. Dow components, Exxon Mobil Corp. XOM and Chevron Corp CVX , increased 1.1% and 0.6%, respectively.

According to the "advance estimate" of U.S. Department of Commerce, fourth quarter GDP came in at 0.7%, in line with the consensus estimate. Despite the slowdown in the fourth quarter, the economy is expected to expand at a pace of 2.4% in 2015. Poor U.S. GDP growth and the BOJ rate cut raised hopes of a slower-than-expected pace of rate hikes.

The blue-chip index slumped in January, losing 5.5% and suffering its most grievous monthly loss since Aug 2015. Disappointing economic data from China, persistent oil supply glut, a stronger dollar and heightened tension in the Middle East also adversely affected oil prices. However, the index gained 2.2% over last week due to a rebound in oil prices following prospects of a cut in production by major oil producing countries.

The DowThisWeek

The index lost 0.1% on Monday following a decline in oil prices and disappointing economic data from China. Oil prices slumped yesterday after prospects of production cuts by major oil producers declined. OPEC's unwillingness to enter into any deal with Russia to control the supply glut reduced the possibility of a production cut.

Separately, China's official manufacturing PMI fell from 49.7 in December to 49.4 in January. The reading has fallen below 50 for the sixth straight month. Moreover, Chinese non-manufacturing PMI declined from 54.4 in December to 53.5 in January.

On the domestic front, the ISM manufacturing index remained unchanged in January at 48.2%. Personal spending remained flat in December. U.S. construction spending increased 0.1% in December, lower than the consensus estimate of a 0.6% increase.

The index declined again on Tuesday, losing 1.8% as oil prices continued to fall. Oil prices plunged further as hopes of a possible deal between OPEC and Russia dimmed. Dismal economic data from China and a mild U.S. winter increased concerns over weak global oil demand. Shares of Exxon Mobil fell 2.2% due to disappointing earnings results.

Meanwhile, Alphabet's $531 billion market cap officially surpassed Apple's market cap of $524 billion at the close after posting encouraging results. Additionally domestic auto sales registered an annualized selling pace of 17.58 million compared with December's figure of 17.34 million.

The index advanced 1.1% on Wednesday following a strong rebound in oil prices. Prices rose on news that Russia is considering participating a meeting between some of the major oil producers of the world. It is being speculated that the meeting will focus on production cuts to control the increasing supply glut.

Meanwhile, fall in the U.S. dollar also boosted crude prices. Earlier in the day, an EIA report on increase in crude inventories negatively impacted crude prices. The ISM Services Index decreased from 55.3% in December to 53.5% in January, reaching the lowest level in nearly two years.

The index added 0.5% on Thursday due to strong gains in materials and industrials stocks. The U.S. Dollar Currency Index continued to fall for the fourth successive session as poor economic reports reduced expectations of several rate hikes this year. A weak U.S. dollar helped in boosting prices of copper and other key metals. This in turn had a broad-based impact on the materials and industrials stocks.

Meanwhile, new orders for manufactured goods decreased 2.9% in December, compared with the consensus estimate of a 2.1% decline. Oil prices retreated on after gaining over the last two sessions as hopes of a production cut by major oil producers seemed doubtful.

ComponentsMovingthe Index

Microsoft reported second quarter 2016 earnings per share adjusted for Windows 10 deferrals and currency effect of 78 cents, which beat the Zacks Consensus Estimate of 69 cents.

The company is about half-way to the $20 billion in annualized commercial cloud revenue run rate by 2018 with management saying that the commercial cloud revenue run rate touched $9.4 billion last quarter.

Reported revenue of $23.80 billion was up 16.8% sequentially, down 10.1% from last year and short of the Zacks Consensus Estimate by 5.2%. Revenue deferrals on account of Windows 10 were $1.90 billion. Currency had a $1.21 billion impact on revenue with the segment impact coming in exactly as guided.

ExxonMobil posted fourth-quarter 2015 earnings of 67 cents per share that beat the Zacks Consensus Estimate of 64 cents. The bottom line, however, deteriorated from $1.56 per share in the year-ago quarter.

Total revenue in the quarter decreased to $59.8 billion from $87.3 billion in the year-ago quarter. The top line, however, was ahead of the Zacks Consensus Estimate of $50.6 billion. Capital spending decreased 29% year over year to $7.4 billion.

Full-year earnings came in at $3.85 per share, in line with the Zacks Consensus Estimate. However, the reported figure was lower than the year-ago earnings of $7.60 per share.

Chevron Corp. reported dismal fourth quarter results as the oil market slump continued to deepen. The company reported a loss per share of 31 cents, contrary to the Zacks Consensus Estimate of a profit of 48 cents. Last year, Chevron earned $1.85 per share during the period.

Quarterly revenue fell 36.5% year over year to $29,247 million but was able to beat the Zacks Consensus Estimate of $27,544 million on higher production.

Chevron's total production of crude oil and natural gas edged up 3.5% from the year-earlier level to 2,673 thousand oil-equivalent barrels per day (MBOE/d). The company's downstream segment achieved earnings of $1,011 million, 33.4% lower than the profit of $1,518 million last year.

Visa Inc.V posted first-quarter fiscal 2016 (ended Dec 31) operating earnings of 69 cents that marginally beat the Zacks Consensus Estimate of 68 cents. An increase in revenues contributed to better-than-expected earnings, which were partly offset by the strong U.S. dollar.

Total operating revenue for the reported quarter was $3.6 billion, up 5.4% year over year. Revenues, however, were in line with the Zacks Consensus Estimate. On a constant currency basis, revenues grew 8% from the year-ago period. The upside was driven by higher service revenues, data processing and international transaction revenues.

For fiscal 2016, Visa expects annual net revenue growth in the high single-digit to low double-digit range, with an adverse foreign currency impact of about 3%. Meanwhile, Visa anticipates annual operating margin to be in the mid 60% range.

Pfizer Inc.PFE posted fourth quarter 2015 earnings of 53 cents per share, a cent above the Zacks Consensus Estimate but down 2% from the year-ago period.

Revenues, which grew 7% to $14.047 billion, were well above the Zacks Consensus Estimate of $13.605 billion. Full year earnings came in at $2.20 per share, down 3%, while revenues declined 2% to $48.851 billion.

Pfizer expects 2016 earnings of $2.20 to $2.30 per share on revenues of $49 billion to $51 billion. The Zacks Consensus Estimate for earnings and revenues is currently $2.38 per share and $52.5 billion, respectively.

Merck & Co.MRK reported fourth quarter 2015 earnings of 93 cents per share, surpassing the Zacks Consensus Estimate of 91 cents and increasing 6.9% from the year-ago period.

Revenues for the quarter declined 2.5% to $10.215 billion, missing the Zacks Consensus Estimate of $10.453 billion. Currency movement negatively impacted revenues by 7%. This was partially offset by the Cubist acquisition.

Full-year earnings came in at $3.59 per share, up 2.9% while revenues declined 6.5% to $39.5 billion.

Merck expects 2016 earnings of $3.60 to $3.75 per share on revenues of $38.7 billion to $40.2 billion. While the Zacks Consensus Estimate for earnings is at the higher end of the guidance range at $3.74 per share, revenue guidance fell short of the Zacks Consensus Estimate of $40.4 billion.

3M CompanyMMM raised its first quarter 2016 dividend by 8% year over year to $1.11 per share. 3M had 609,330,124 outstanding shares as on Dec 31, 2015. However, the company is looking to repurchase around $10 billion of outstanding shares in a new share buyback program approved by its board of directors.

The Boeing Co.BA has won a big modification contract from the U.S. Navy for the manufacture of Lot III full-rate production P-8A aircraft for the Navy and the international client. The contract is valued at $2.47 billion.

Per the contract, Boeing will implement an option for the construction and delivery of 20 Lot III full-rate production P-8A aircraft for the U.S. Navy (16 units) as well as for the Australian government (4 units). The contract is slated to be completed in Dec 2018.

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 2%.

Ticker Last 5 Day's Performance 6-Month Performance
GS -0.3% -23.9%
MMM +10% +2%
IBM +4.2% -19%
BA -0.8% -13.9%
AAPL -4.8% -15.7%
UNH -0.1% -5.5%
UTX +2.1% -11%
HD -1.3% +3.1%
TRV +4.2% +0.8%
CVX +1.5% -0.5%

Next Week's Outlook

Oil prices are continuing to guide the broader markets. Concerns over China's economic data have also been weighing on investors for a while now. However, weak domestic economic data is a matter of serious concern. A major slowdown in the fourth quarter GDP has put paid to the Fed taking the fast track on rate hikes.

Even though GDP is expected to rise at 2.4% over last year, economic reports continue to remain far from encouraging. This is why next week's economic releases have acquired a special significance. Several crucial economic reports are scheduled for release starting today. This includes unemployment and trade balance data. Encouraging news on this front could help stocks make steady gains in the days ahead.

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PFIZER INC (PFE): Free Stock Analysis Report

MERCK & CO INC (MRK): Free Stock Analysis Report

BOEING CO (BA): Free Stock Analysis Report

MICROSOFT CORP (MSFT): Free Stock Analysis Report

3M CO (MMM): Free Stock Analysis Report

CHEVRON CORP (CVX): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

VISA INC-A (V): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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