Dow 30 Stock Roundup: Nike Beats, Coca-Cola to Buy AB InBev's Stake in CCBA

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The Dow endured a turbulent week as the postelection rally encountered several roadblocks. Sectors which had fallen out of favor recently, such as technology, regained their popularity among investors. However, financials continued to gain on hopes that deregulation measures would be undertaken by the new administration. The Dow remained within striking distance of the psychological level of 20,000 through the week, but the landmark seemed increasingly unattainable as the week progressed.

Last Week's Performance

The Dow fell a meagre 0.04% last Friday after Pentagon accused China of seizing an underwater U.S. Navy drone in international waters. U.S. authorities have demanded that the drone be returned, a Pentagon spokesman saying "It's ours, it was clearly marked, we want it back, and we don't want this to happen again".

Oracle Corporation ORCL dropped almost 4% to $39.10 on Dec 16 after its second-quarter 2017 revenues turned out to be disappointing. Decline in Oracle had a negative impact on tech shares. Separately, housing starts tanked 18.7% in November indicating that housing recovery remains choppy.

Stocks remained weighed down last week after the Fed raised key interest rates in its two-day policy meeting and indicated that rates might be increased further over the coming years.

Additionally, rising domestic crude inventories sparked oil oversupply concerns and weighed on energy stocks. However, Trump induced rally continued to have a positive impact on the Dow. The index managed to register its sixth consecutive week of gains and continued to hover near its psychologically important 20,000 level.

The DowThisWeek

The index gained 0.2% on Monday as investors snapped up tech behemoths. Stocks closed in the green as investors latched on to recently less-favored sectors. Real estate and telecom stocks also notched up gains. Some investors betting on higher growth and inflation under the Trump administration invested in shares of industrial and financial companies.

However, trading volumes were thinner than usual as most of the investors remained reluctant to make big bets in a preholiday week. All the major indexes also trimmed gains on news of the assassination of the Russian ambassador to Turkey.

The index gained 0.5% on Tuesday led by a rally in bank stocks. Trump's policy on deregulation at a time when rates are expected to increase augurs well for such stocks. Trump's intention to roll back regulations and lower administrative burden will stand in good stead for the banking industry. The Dow continued to remain within striking distance of the psychologically important level of 20,000. However, shortage of market-moving events including economic reports provided little impetus to the blue-chip index to cross that milestone.

The index declined 0.2% on Wednesday due to a broad based decline in the health care sector. Shares of Merck & Co., Inc. MRK and Pfizer Inc. PFE declined 1.8% and 1.4%, respectively. The Dow failed to hit the 20,000 milestone yet again. Meanwhile, real estate shares also lost ground as lean inventory and higher prices continue to choke the housing market. U.S. home resales unexpectedly rose in November, touching its highest level in almost 10 years.

The index declined 0.1% on Thursday dragged down by declines in consumer discretionary shares. Investors stepped back from a postelection rally boosted by expectations that President-elect Donald Trump's policies would stir up growth and inflation. The decline pulled the Dow further away from its psychologically important level of 20,000.

The "third" estimate by the Bureau of Economic Analysis showed that third quarter output of goods and services increased at an annual rate of 3.5%, higher than the consensus estimate of 3.3% increase, buoyed by stronger consumer spending.

ComponentsMovingthe Index

NIKE Inc.NKE reported second-quarter earnings per share of 50 cents rose which represents an 11% year over year increase and is substantially higher than the Zacks Consensus Estimate of 43 cents. The stock has a Zacks Rank #3 (Hold)

Revenues of the swoosh brand owner advanced 6% to $8,180 million in the reported quarter and exceeded the Zacks Consensus Estimate of $8,082 million. Further, sales grew 8% on a currency neutral basis.

Management reiterated its fiscal 2017 revenue projections, and anticipates the same to grow at a high single-digit rate. For third-quarter fiscal 2017, the company expects revenues to grow in the mid single-digit range. (Read: NIKE (NKE) Up on Q2 Earnings Beat, Future Orders Still Soft )

The Coca-Cola CompanyKO has entered into an agreement to buy Anheuser-Busch InBev's (AB InBev) stake in Coca-Cola Beverages Africa, or CCBA. The latest deal is in sync with Coca-Cola's plan, which was announced in October after AB InBev's acquisition of SABMiller, to exercise its right to acquire AB InBev's interest in CCBA.

The beverage giant intends to temporarily hold the territories until they can be refranchised to other partners. Per the deal, Zacks Rank #3 rated Coca-Cola will purchase AB InBev's 54.5% equity stake in CCBA for $3.15 billion. Notably, CCBA operates in South Africa, Namibia, Kenya, Uganda, Tanzania, Ethiopia, Mozambique, Ghana, Mayotte and Comoros.

Additionally, both the parties have agreed that Coca-Cola will acquire AB InBev's interest in bottling operations in Zambia, Zimbabwe, Botswana, Swaziland, Lesotho, El Salvador and Honduras for an undisclosed amount. (Read: Coca-Cola (KO) to Buy AB InBev's Stake in CCBA for $3.15B )

The Boeing CompanyBA and Textron Inc.'s TXT wholly owned subsidiary - Bell Helicopter's strategic joint venture (JV) Bell-Boeing recently secured two modification contracts totaling $411.9 million. The contracts were awarded by the Naval Supply Systems Command Weapons Systems Support, Philadelphia, PA. They cover the repair of various parts of the V-22 aircraft. (Read: Bell-Boeing JV Wins Two Navy Deals Worth $412M for V-22 )

In a separate development, Boeing has secured a foreign military sales (FMS) contract for the procurement of 51 full rate production Lot 90 Harpoon weapon systems, components and spares. These will be delivered to the governments of Egypt, Korea and Brazil. Valued at $207.5 million, this deal was awarded by the Naval Air Systems Command, Patuxent River, MD. The stock has a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Merck & Co., Inc. announced that its anti-PD-1 therapy, Keytruda, was rendered a positive opinion in the EU for the first-line treatment of metastatic lung cancer. The European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) recommended marketing approval of Keytruda for the treatment of first-line non-small cell lung cancer (NSCLC) in patients whose tumors have high PD-L1 expression with no EGFR or ALK-positive tumor mutations. The stock has a Zacks Rank #3. (Read: Merck Keytruda Gets CHMP Nod for First-Line Lung Cancer )

Apple Inc.AAPL took a legal stand against European Union competition authorities on Dec 19, formally appealing the EU's August decision ordering the iPhone maker to pay back 13 billion euros, or $13.6 billion, in unpaid taxes.

The European Commission had previously accused Zacks Rank #3 rated Apple of accepting illegal state aid in addition to its tax arrangements in Ireland, where its European headquarters are located. Ireland contested the original decision against Apple, saying the EU was interfering with its sovereignty.

Even the U.S. Treasury said the EU was making itself a "supra-national tax authority" that may jeopardize any future global tax reform efforts. The Brussels-based Commission, however, made a filing of its own, disclosing more details of a two-year investigation and reiterating its stance that Ireland offered preferential tax treatment to Apple, which is illegal in the EU. (Read: Apple Appeals EU Tax Ruling: What Investors Should Know )

The Walt Disney Company 's DIS latest release Rogue One: A Star Wars Story has helped it to clock a new Hollywood record. Disney's Studios touched $7 billion mark at the global box office in 2016 and surpassed its last year's collection of $6.89 billion. The notable movie releases in 2016 were Captain America: Civil War, Finding Dory and Zootopia , all of which surpassed $1 billion at the box office. The stock has a Zacks Rank #3.

Further, Jungle Book saw excellent business with a worldwide collection of $966 million. Star Wars: The Force Awakens , which was released in Dec 2015, shattered box office records with a massive collection of $2.1 billion worldwide which gave a boost to the company's box office collections in 2016. (Read: Disney's Movies Set New Records in 2016, Touch $7B Mark )

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 0.1%.

Ticker Last 5 Day's Performance 6-Month Performance
MMM -2.1% +2.9%
GS -1.4% +57.3%
IBM -1% +7.5%
HD -0.3% +5.6%
BA +2.8% +17.9%
UNH +0.8% +16.1%
MCD -1.2% +2.1%
TRV +1.5% +4%
JNJ -0.8% -1.7%
AAPL -0.1% +21%

Next Week's Outlook

As the week nears its end, the postelection rally seems to be petering out. However, certain market sectors such as financials will continue to gain even as other, recent favorites take losses. Meanwhile, stocks which had fallen out of favor recently are making a comeback and this trend is likely to continue. The third quarter GDP report has been a solid one and if upcoming economic data is similarly positive, stocks could return to their winning ways even as trading remains thin next week.

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DISNEY WALT (DIS): Free Stock Analysis Report

PFIZER INC (PFE): Free Stock Analysis Report

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

BOEING CO (BA): Free Stock Analysis Report

COCA COLA CO (KO): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

ORACLE CORP (ORCL): Free Stock Analysis Report

TEXTRON INC (TXT): Free Stock Analysis Report

NIKE INC-B (NKE): 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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