The Dow suffered a particularly tough week, weighed down by a number of concerns. Speculation that the Fed would hike rates for the fourth time this year dampened investor sentiment. Ultimately, the Fed did hike rates, leading to heavy losses for investors.
The absence of positive developments on the trade war front didn't help matters. The end of the week was marred by fears of a partial government shutdown.
Last Week's Performance
The index plunged 2% last Friday following investors' concerns about an impending global economic slowdown. A series of weaker-than-expected economic reports from China and the European Union raised eyebrows of several market participants. Friday's closing was the blue-chip index's lowest close since May 3.
On Dec 14, National Bureau of Statistics of China reported that industrial output grew 5.4% year over year in November, its slowest pace in almost three years. Chinese retail sales rose 8.1% year over year in November, marking the weakest growth since 2003.
Meanwhile, the European Central Bank (ECB) has lowered its growth forecast for the European Union (EU) for both 2018 and 2019. The new growth rate for 2018 is projected at 1.9% from 2% forecast earlier.
The index lost 1.2% last week. Concerns over global economic growth due to lingering trade-tensions between the United States and China led to severe losses. Geopolitical problems in the European Union also weighed on stocks. Concerns about emerging markets and lack of clarity about trade negotiations between the United States and China are other reasons for last week's reverses.
The index lost 2.1% on Monday as investors remained wary about the Fed's likely fourth rate hike for 2018. Moreover, absence of any positive news either on the trade war front or in the form of economic data made investors skeptical about investing in risky assets like equities.
The index rebounded on Tuesday, gaining 0.4%. The blue-chip index was up 335 points at its session high and fell 77 points at its low. However, Wall Street's gains were curbed by investor concerns about a fourth rate hike, plummeting crude oil prices and a possible government shutdown.
The index declined 1.5% on Wednesday after witnessing a highly volatile session following the Fed's decision to hike rates for the fourth time this year. Investors engaged in panic selling despite the fact that the central bank reduced its projected rate hikes for 2019. Positive developments on the U.S.-China trade war front also failed to lift investor sentiment.
The index plunged 2% on Thursday as investors remained concerned about the Fed's reluctance to cease the process of monetary normalization. New fears about a likely government shutdown also spooked investors, leading to additional volatility. Ultimately, the Dow registered its lowest close since October 2017.
NIKE, Inc.NKE reported fiscal second-quarter earnings of 52 cents per share, beating the Zacks Consensus Estimate of 45 cents per share. This compares to earnings of 46 cents per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of 15.56%. A quarter ago, it was expected that this athletic apparel maker would post earnings of 62 cents per share when it actually produced earnings of 67 cents, delivering a surprise of 8.06%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
Zacks Rank #3 (Hold) Nike, which belongs to the Zacks Shoes and Retail Apparel industry, posted revenues of $9.37 billion for the quarter ended November 2018, surpassing the Zacks Consensus Estimate by 2.36%. This compares to year-ago revenues of $8.55 billion. The company has topped consensus revenue estimates in each of the last four quarters. (Read: Nike Tops Q2 Earnings and Revenue Estimates )
Walgreens Boots Alliance, Inc.WBA reported adjusted earnings per share of $1.46 for first-quarter fiscal 2019, up 14.1% year over year (same at constant exchange rate or CER). The figure surpassed the Zacks Consensus Estimate of $1.43.
On a reported basis, net earnings came in at $1.12 billion, reflecting a 36.8% surge from the prior-year quarter. Reported EPS came in at $1.18, up 45.7% on a year-over-year basis.
Zacks Rank #3 Walgreens Boots recorded total sales of $33.79 billion in the fiscal first quarter, up 9.9% year over year and up 11.4% at constant exchange rate or CER. The top line exceeded the Zacks Consensus Estimate of $33.58 billion. (Read: Walgreens Q1 Earnings Top Estimates, Margins Down )
The Boeing CompanyBA recently announced plan to reward its shareholders with a sturdy dividend hike of 20%. Alongside, management has authorized a new stock repurchase authorization program of $20 billion that replaces the existing share buyback program. These initiatives are likely to enable investors to benefit from soaring airliner deliveries.
Boeing will now pay a quarterly dividend of $2.055 per share, up from $1.71 paid earlier, bringing the company's annualized dividend to $8.22. The company will pay the revised dividend on Mar 1, 2019 to stockholders on record as of Feb 8, 2019.
Boeing has declared the completion of its share repurchase program for 2018. The new approval has authorized for share repurchase worth $20 billion, up from the prior plan. Management is yet to decide the timing and volume of repurchases.
The new share repurchase authorization will resume in January 2019 and be made over the next 24 months. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Johnson & JohnsonJNJ said its board of directors has authorized a share buyback plan worth $5 billion and maintained its previously issued guidance for 2018. J&J expects 2018 adjusted earnings per share in the range of $8.13-$8.18 while revenues are anticipated in the band of $81-$81.4 billion.
Zacks Rank #3 J&J's stock was down 2.9% on Dec 17 after declining 10% on Dec 14, following a Reuters report, which stated that the pharma giant knew for decades that its baby powders contained asbestos.
J&J has more than 11,000 cases pending in relation to its baby powders containing talc in the United States. Most lawsuits allege that the company's talc-based products including its baby powders contain asbestos, which causes its users to develop ovarian cancer. (Read: J&J Okays $5B Stock Buyback Plan, Stock Remains Stressed )
The Goldman Sachs GroupGS and two of its former employees have been slapped with criminal charges by Malaysia in relation to the 1Malaysia Development Bhd (1MDB) scandal. However, the bank continues to deny any wrongdoing.
The Malaysian government seeks to charge a total penalty of more than $2.7 billion worth funds that were allegedly misused and the $600 million that Goldman had received as fees. Moreover, the two employees, if proven guilty, will have to serve prison terms of up to 10 years.
Zacks Rank #3 Goldman has been scrutinized for playing a part in raising funds through bond offerings for 1MDB - the fund, which is facing corruption and money-laundering probes in roughly six countries.
Notably, per the U.S. Department of Justice, misappropriation of funds worth nearly $4.5 billion from 1MDB by top officials of the fund and their colleagues from 2009 through 2014 also included funds raised through Goldman. (Read: Goldman Sachs Faces Criminal Charges Over 1MDB Case )
Merck & Co., Inc.MRK announced that the FDA has approved its anti-PD-1 therapy, Keytruda, for the treatment of adult and pediatric patients with recurrent locally advanced or metastatic Merkel cell carcinoma (MCC), a rare form of skin cancer. Merck has a Zacks Rank #2
The approval was based on favorable data from the open-label phase II KEYNOTE-017 study, initiated and conducted by the Cancer Immunotherapy Trials Network (CITN).
Data from the study showed that as a monotherapy, Keytruda demonstrated an objective response rate of 56%, complete response rate of 24% and a partial response rate of 32% in patients with recurrent locally advanced or metastatic MCC, who previously did not receive any systemic therapy for their disease. (Read: Merck's Keytruda Gets FDA Approval for Rare Skin Cancer )
Performance of the Top 10 Dow Companies
The table given below shows the price movement 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 past five trading days, the Dow has plunged 4.4%.
Next Week's Outlook
With markets set to end the year on a low note, a Santa Claus rally looks highly unlikely. Uncertainty still prevails over efforts to resolve the U.S.-China trade crisis. The Fed's fourth rate hike and intent to raise rates further in 2019 hasn't helped matters.
Fears of a partial government shutdown have added to investor concerns. Investors will likely hope for a quiet holiday-shortened week before commencing trading next year on a cautious note.
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