Dow 30 Stock Roundup: Pfizer Scraps Astrazeneca Deal, CVX Production Growth on Track - Analyst Blog

The Dow had a good week, but for Tuesday when it snapped a four-session winning streak to close in the red. A rise in new home sales lifted the blue chip index on Tuesday. The Dow ended in the red on Wednesday, following a decline in retail stocks and capital return announcements from McDonald's Corp. ( MCD ). The blue chip index returned to its winning ways on Wednesday after initial claims declined significantly. The Dow has gained 0.14% during the first three trading days of this holiday shortened week.

Last Week's Performance

The Dow gained 0.4% and fellow benchmarks also ended in positive territory, following a rise in new home sales. Sales of new single-family houses increased 6.4% from March's revised rate of 407,000 to seasonally adjusted annual rate of 433,000 in April. Friday's gains helped the blue-chip index close in the green for the year. Homebuilder stocks were among the biggest gainers for the day.

For the week, the Dow closed in the green, moving up 0.7%. Gains in small-cap and high-growth stocks drove benchmarks higher for the week. Additionally, gains from consumer discretionary and energy stocks helped benchmarks finish in the green. Indexes were also positively impacted after minutes from the Federal Open Market Committee's (FOMC) April meeting indicated that the central bank decided to remain flexible when it comes to raising short-term interest rates.

The Dow This Week

European Central Bank President Mario Draghi's comments on Memorial Day helped benchmarks open higher on Tuesday. Draghi's comments indicated that ECB might cut rates and provide more economic stimulus during next week's policy meeting. The day's 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 0.4%.

The Dow snapped a four-day winning streak, losing around 0.3% on Wednesday after investors took a breather and retail stocks declined. McDonald's Corp. was a big drag on the blue-chip index. Its shares decreased 1.0% after the company made major capital return announcements. The fast food behemoth expects to return $18 billion to $20 billion to its shareholders between 2014 and 2016. Compared to the previous three-year period, this is an increase by 10% to 20%.

Merger and acquisition activity in the food industry and better-than-expected initial claims numbers helped benchmarks close in the green on Thursday. The number of people applying for unemployment benefits last week touched the second-lowest level since the end of recession in mid-2009. Investors chose to focus on the positives rather than on GDP data that showed the economy contracted in the first quarter. The Dow gained 0.4%.

Components Moving the Index

Pfizer ( PFE ) abandoned its plans to takeover AstraZeneca ( AZN ), a week after being rejected for the fourth time. Pfizer's decision brings down the curtain, at least for now, on its attempts to create one of the largest pharmaceutical companies in the world.

Pfizer made its initial offer to buy AstraZeneca last month. As per the initial offer, Pfizer was looking to acquire AstraZeneca for more than £60 billion (about $101 billion). The offer was rejected by the British company as were the subsequent improved offers.

On May 18, 2014 Pfizer made its final takeover proposal. The proposal valued AstraZeneca at £55.00 (approximately $92.53) per AstraZeneca share (comprising 1.747 shares in the combined entity and 2,476 pence in cash).

AstraZeneca, while rejecting the final offer, stated that the proposal undervalued the company and would be significantly dilutive to its shareholders. Apart from that, AstraZeneca continued to harbor concerns regarding the transaction structure and risks related to the proposed inversion structure.

Chevron Corp. ( CVX ) declared that its production growth target is on track during its 2014 Annual Meeting of Stockholders. The company intends to reach a production level of 3.1 million barrels of oil-equivalent per day by 2017, marking 20% increase from the 2013 output. Further growth can be expected toward the end of the decade.

Chevron has over 70 projects in the pipeline, due to start by 2020. The company's Gorgon LNG project in Australia is 80% completed and due to commence operations in mid-2015. The Wheatstone project, also in Australia, is progressing according to plan as well, and commencement is expected in 2016.

Chevron's growth plans include $39.8 billion investment in 2014, with focus on oil and gas associated legacy assets. However, the projected expenditure is lower than the year-ago capital spending by around $2 billion.

ExxonMobil Corp 's ( XOM ) $19 billion Papua New Guinea (PNG) liquefied natural gas (LNG) project has dispatched the first cargo of LNG ahead of schedule.

Operated by ExxonMobil's affiliate ExxonMobil PNG Limited, PNG LNG, is anticipated to generate over 9 trillion cubic feet of gas over its estimated 30 years of operation. Japan's Tokyo Electric Power Co. Inc. (TEPCO) will be the recipient of the first cargo.

The project's output is likely to be consigned to four of its major customers - China Petroleum and Chemical Corp. (Sinopec) ( SNP ), Tokyo Electric Power Co. Inc. (TEPCO), Osaka Gas Co. Ltd., and CPC Corp. Taiwan.

General Electric Co. ( GE ) will sell its subsidiary GE Aviation's hydraulic actuation business to Triumph Group, Inc. ( TGI ). This transaction will further strengthen Triumph Group's Aerospace Systems segment.

Triumph Group will pay $70 million for the actuation business, which is expected to be immediately accretive to earnings. The actuation business has three facilities, which are expected to generate $180 million in annual revenues. This business has commercial ties with The Boeing Co. ( BA ), Airbus and other major airframers.

Intel Corp. ( INTC ) recently signed an agreement with Rockchip, a Chinese mobile chipmaker in a bid to produce chips for cheap tablet computers running on Google Inc. 's ( GOOG ) Android operating system. The financials of the deal were not disclosed.

The two companies will build a mobile systems-on-a-chip (SoC) platform called SoFIA under Intel's brand name. The quad-core platform will feature Intel's x86 Atom processor core and 3G modem technology and will be available in the first half of 2015. The chips will be manufactured by Taiwan Semiconductor Manufacturing Company.

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 1.19%.

Ticker Last 5 Day's Performance 6 month performance
V +2.37% +5.51%
IBM -0.98% +2.27%
GS +0.92% -4.85%
MMM +1.19% +6.65%
BA +2.57% +0.66%
CVX -1.54% -0.10%
UTX +1.44% +4.95%
XOM -0.57% +8.33%
MCD -1.26% +4.08%
CAT +0.68% +22.46%

Next Week's Outlook

This holiday-shortened week has been a good one for the Dow. Barring Tuesday, the blue chip index has moved up, fueled primarily by economic indicators. This includes data on consumer confidence, durable orders, and the housing sector. A major decline in initial claims was another significant development.

Next week has a plethora of important economic reports lined up.These include the ISM manufacturing and services index, factory orders, construction spending and employment data. Investors have chosen to ignore disappointing GDP data to focus on the positives. If most of these reports are on the brighter side, it is likely that the blue chip index will continue to climb upwards.

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CHEVRON CORP (CVX): Free Stock Analysis Report

CHINA PETRO&CHM (SNP): Free Stock Analysis Report

BOEING CO (BA): Free Stock Analysis Report

INTEL CORP (INTC): Free Stock Analysis Report

ASTRAZENECA PLC (AZN): Free Stock Analysis Report

TRIUMPH GRP INC (TGI): Free Stock Analysis Report

PFIZER INC (PFE): Free Stock Analysis Report

MCDONALDS CORP (MCD): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

GENL ELECTRIC (GE): 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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