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Dow 30 Stock Roundup: Boeing Receives Orders Worth $38B From China Cos, Caterpillar to Cut 5K Jobs

The Dow endured a difficult week, weighed down by multiple concerns, especially those regarding China's economy. The blue-chip index gained on Monday after Federal Reserve President Dennis Lockhart's hawkish comments boosted investor sentiment. The Dow declined on Tuesday after selloff in commodity, auto and biotech stocks dragged benchmarks lower.

The blue-chip index moved lower on Wednesday due to decline in energy and raw material shares. The Dow suffered losses again on Thursday after a major component and leading heavy equipment company decided to cut jobs. The Dow has lost 1.1% during the first four trading days.

LastWeek's Performance

Last Friday, concerns about global economic growth and slump in oil prices dragged benchmarks lower. The Dow declined 1.7% on a "quadruple witching" day. On these days, market index futures, market index options, stock options and stock futures expire, which results in increased volatility.

The Fed's decision on Thursday to leave interest rates unchanged on global economic concerns sparked a selloff on Friday. Fed's decision on interest rates also had a negative impact on oil prices on Friday. The rout in oil prices dragged energy shares lower.

For the week, the S&P 500 and the Dow declined 0.2% and 0.3%, respectively. However, the Nasdaq ended the week with gains of 0.1%. Benchmarks ended mostly lower for the week following the Fed's decision to keep the key rates unchanged.

Meanwhile, China dampened investor sentiment further after reporting lower-than-expected investment and factory output for August. Discouraging data from China raised fears of lower demand for crude; thereby dragging crude prices lower.

Among the positives, homebuilder sentiment index touched the highest level in September in almost a decade. Increase in builder confidence for newly built single-family houses, indicated an improving housing market.

The DowThisWeek

The blue-chip index gained 0.8% on Monday. Federal Reserve President Dennis Lockhart's hawkish comments boosted investor sentiment. While acknowledging the Fed's multiple concerns, Lockhart said: "As things settle down, I will be ready for the first policy move on the path to a more normal interest-rate environment. I am confident the much-used phrase 'later this year' is still operative."

However, the day's gains were capped due to declines in biotech and drug manufacturing shares. Shares of healthcare companies fell sharply yesterday after U.S. Democratic presidential candidate Hillary Clinton said that she will lay out a plan to restrict "price gouging" in the specialty drugs market.

Meanwhile, rise in oil prices had a positive impact on energy shares. Oil prices ended higher on Monday on bets that global crude production will decline in future.

The Dow declined 1.1% on Tuesday after selloff in commodity, auto and biotech stocks dragged benchmarks lower. Shares of miners and other raw material producers tumbled on concerns about China's economy. This was a result of the negative impact on commodity prices following worries about slower growth in China.

Meanwhile, allegations of Volkswagen AG VLKAY cheating vehicle emission test weighed on auto stocks. Shares of Volkswagen plunged 15.5%. Biotech and drug manufacturing stocks declined for the second day in a row after U.S. Democratic presidential candidate Hillary Clinton said that she will lay out a plan to restrict the price of prescription drugs to $250 a month.

The blue-chip index lost 0.3% on Wednesday due to decline in energy shares; which in turn was a result of a rout in crude oil prices . Oil prices had moved north earlier in the session due to lower crude inventories.

However, rise in oil prices was offset by large buildup in U.S. gasoline stocks, which eventually dragged oil prices into negative territory. Dow components Exxon Mobil Corporation XOM and Chevron Corporation CVX dropped 0.6% and 1.5%, respectively.

Shares of raw material producers also tumbled after China's manufacturing data fell to its lowest level in September since Mar 2009. Meanwhile, Eurozone's manufacturing and services activity fell moderately in September.

The Dow declined again on Thursday, losing 0.5% after Caterpillar Inc.'s CAT decision to cut jobs weighed on the broader markets. Shares of the world's largest mining and construction equipment maker tanked 6.3% on Thursday, the most among the Dow components.

Meanwhile, investors' sentiment dwindled ahead of the Fed Chair's Janet Yellen's speech on inflation and monetary policy to be held after the market closes on Thursday. Investors are looking for clues on the timing of a rate hike. Healthcare stocks declined again with biotech companies leading losses.

ComponentsMovingthe Index

Boeing Co.BA announced orders and commitments for 300 jets from Chinese companies after its meeting with Chinese President Xi Jingping, who addressed about 600 Boeing employees inside an assembly bay at the company's Everett factory.

Of the 300 jets, 250 will be single aisle 737's and 50 will be wide-body jets. The total order of jets carries a list price of $38 billion, but after standard industry discounts, the actual value of the deal is typically half of that. Boeing said Chinese leasing companies ICBC and CDB will take 60 single aisled 737's, while the other 190 737's are divided among China's airlines.

The company also announced its largest investment in China. It has inked a cooperation document with Commercial Aircraft Corporation of China (Comac) for construction of an aircraft completion center for its 737 jet in China.

General Electric CompanyGE has formed a new finance subsidiary - GE International Funding Company - which initiated a private offer to exchange up to $30 billion of outstanding debt for new notes with shorter maturities.

The issuing entity is a newly formed finance subsidiary of GE Capital. In order to comply with the debt covenants under the GE Capital restructuring scheme, GE Capital will eventually merge into GE.

Per the private debt exchange offer, holders of 123 different tranches of debt issued by GE Capital will be eligible to exchange their notes for new notes with much shorter maturities. Existing notes worth about $100.4 billion qualify for the exchange, which expires on Oct 19 and has a ceiling of $30 billion.

Leading credit rating agency Moody's assigned a rating of A1 to the new notes, with a stable outlook. The strong investment grade rating is based on the unconditional and irrevocable guarantees given by both GE and GE Capital for the notes.

Caterpillar Inc. , the world's largest manufacturer of construction and mining equipment, will be cutting up to 5,000 salaried and management jobs between now and the end of 2016. The total workforce reduction, however, could be more than 10,000 jobs lost, factoring in potential manufacturing closures through 2018.

These significant job cuts are a result of a corporate restructuring of the company that is expected to lower operating costs by approximately $1.5 billion on a yearly basis once executed. Caterpillar also lowered its 2015 guidance to $48 billion, which is $1 billion lower than the previous outlook of roughly $49 billion. In addition to a lowered guidance, its expected 2016 sales and revenues will be five percent lower than those of 2015.

Cisco Systems Inc.CSCO announced a $100 million joint venture (JV) with China's information technology firm, Inspur Group, to sell networking and cloud computing products in the country.

The deal, part of Cisco's plan announced in June to invest up to $10 billion in China, will overlap with Chinese President Xi Jinping's visit to Seattle. Cisco will invest $49 million - representing 0.5% of the $10 billion target - for a 49% stake in the JV.

3M Company 's MMM , 3M Safety and Graphics Business Group recently announced a minority equity investment in StrongArm Technologies Inc., - a company that designs innovative safety products.

In another development, 3M's fluorinert electronic liquid helped Japan-based, microprocessor firm PEZY Computing to secure a top position in the Green500 list. Green500 ranks supercomputers globally based on energy-efficiency. 3M's liquid offers several advantages of liquid immersion cooling.

Merck & Co. Inc.MRK announced encouraging data from two pivotal phase III clinical studies for its investigational antitoxin bezlotoxumab for prevention of recurrence of Clostridium difficile (C. difficile) infection. Data from the phase III studies - MODIFY I and MODIFY II - were presented at the Interscience Conference of Antimicrobial Agents and Chemotherapy and International Congress of Chemotherapy and Infection joint meeting.

The two global, double-blind, phase III studies evaluated the use of bezlotoxumab alone or in combination with actoxumab, in comparison to placebo for the prevention of recurrent C. difficile infection in patients on standard of care antibiotics for a primary or recurrent C. difficile infection. Both the studies met their primary efficacy endpoint.

Pfizer Inc.PFE announced top-line data from two phase III induction studies on its rheumatoid arthritis (RA) drug, Xeljanz (tofacitinib; 10 mg twice daily), from the Oral Clinical Trials for tofAcitinib in ulceratiVE colitis (OCTAVE) global development program.

Both studies - OCTAVE Induction 1 and OCTAVE Induction 2 - were conducted for the treatment of adults suffering from moderate-to-severe ulcerative colitis (UC) and achieved their primary endpoints. On the safety front, no new safety issues were reported. Pfizer intends to present detailed analyses including additional efficacy and safety data at a future scientific meeting.

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 lost 1.4%.

Ticker Last 5 Day's Performance 6-Month Performance
GS -4.4% -7.4%
MMM -2.6% -17.3%
IBM -2% -11.4%
BA -3.6% -14.4%
AAPL +0.7% -9.2%
UNH +2% +2.5%
UTX -6% -27%
HD +0.7% +0.1%
TRV -0.6% -9.5%
CVX +1.4% -26.2%

Next Week's Outlook

China has weighed heavily on investor sentiment this week on most days. A recent survey has shown that the country's government will revise its growth target for the year from 7% to 6.5%. At the same time, authorities are indicating that equity markets are stabilizing.

Meanwhile, uncertainty about the timing of the interest rate has also spooked markets. However, Dennis Lockhart's hawkish comments have boosted sentiment. Moreover, the Fed Chair has also indicated during her speech late on Thursday that she expects a rate hike in 2015 itself.

Additionally, all the economic reports released this week were quite encouraging. Global concerns continue to weigh on investors. However, markets may soon focus on an encouraging domestic scenario. Several important economic reports are lined up for release for the next few days, starting with today's GDP numbers. Positive signs on this front could soon help stocks return to their winning ways.

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CHEVRON CORP (CVX): Free Stock Analysis Report

3M CO (MMM): Free Stock Analysis Report

BOEING CO (BA): Free Stock Analysis Report

CATERPILLAR INC (CAT): Free Stock Analysis Report

PFIZER INC (PFE): Free Stock Analysis Report

CISCO SYSTEMS (CSCO): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

GENL ELECTRIC (GE): Free Stock Analysis Report

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

VOLKSWAGEN-ADR (VLKAY): 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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