Dow 30 Stock Roundup: Boeing Secures $11B Order, Apple Buys Vrvana
Swarup Gupta
Updated
The Dow experienced a relatively sluggish holiday shortened week, suffering losses during two trading sessions. Investors continued to remain concerned about the Trump administration’s ability to push through tax cuts. Meanwhile, tech stocks notched up strong gains. Also, the Fed’s November minutes reflected the central bank’s concern about sluggish inflation.
Last Week’s Performance
The Dow declined by 0.4%, or 100.12 points last Friday. Investors remained cynical over the Trump administration’s ability to pass the bill in the Senate by the end of this year. This was mainly because the Senate’s version of the tax plan was quite different from that of the House panel's in several ways. Along with the tax cut woes, news of a probe into Russia’s interference in 2016 U.S. election also weighed on the Dow.
The index lost 0.3% over last week, marking its second successive weekly decline. While tax woes continued to worry investors, gains were capped further after shares of General Electric Company GE plummeted to a five-year low after releasing weak EPS guidance for 2018 and halved its dividend.
Moreover, oil prices declined after the IEA slashed its global crude-demand forecasts. Meanwhile, the Senate Finance Committee announced major amendments to its version of the tax bill. Strong earnings results from Wal-Mart Stores, Inc. WMT and Cisco Systems Inc. CSCO helped curb gains for the index.
The Dow This Week
The index gained 0.3% on Monday. Verizon Communications Inc’s VZ shares increased 1.7% after Wells Fargo analyst Jennifer Fritzsche raised the telecom giant’s price target from 48 to 50. Fritzsche also projected stronger dividend outlook for the company. Meanwhile, investors continued to focus on the prospects of Republicans’ tax overhaul plans.
The index increased 0.7% on Tuesday following gains in the technology and healthcare sectors. Shares of Apple Inc. AAPL increased 1.9% yesterday while other tech giants like Facebook, Inc. FB and Alphabet Inc. GOOGL gained 1.8% and 1.5%, respectively. Existing homes sales rose 2% in October from September to a seasonally adjusted rate of 5.48 million.
The index lost 0.3% on Wednesday after Fed minutes hinted that a near term rate hike was more or less certain but future hikes could occur at a slower than expected pace due to sluggish inflation. The minutes took on a more dovish tone than previous discussion, indicating that members were concerned that persisting with soft interest rates could build up a financial bubble. Markets were closed on Thursday for the Thanksgiving Day holiday.
Components Moving the Index
Apple has purchased Canada-based AR headset maker Vrvana for $30 million to boost its augmented reality efforts, per a TechCrunch Report. Vrvana is best known for its Totem headset, which combines AR and virtual reality technologies. (Read: Apple Expands in AR, Acquires Headset Maker Vrvana)
In another development, Zacks Rank #3 Apple has removed a host of apps, including Skype from its China Store following a government notification. Skype is also not available on other third party app stores like Tencent Holdings Ltd and Qihoo 360 Technology Co Ltd. However, users who have the app installed are able to access the service, added the report. (Read: Apple Withdraws Skype From China App Store)
American Express Company AXP recently announced the launch of blockchain-enabled, business-to-business cross-border payments. The new payment system, known as American Express FX International Payments (“FXIP”), has been developed in collaboration with Ripple — a provider of enterprise global blockchain solutions.
This blockchain payments system primarily aims at lowering the time and cost of settlement, along with taking care of Zacks Rank #3 (Hold) American Express’s commitment toward security. The company has selected Santander UK as a partner in order to introduce this new payment channel.
With the collaboration between Ripple and the FXIP, consumers can execute non-card payments through Ripple’s real-time payment network, known as RippleNet. RippleNet would facilitate faster remittances from American Express customers in the United States to U.K. bank accounts through Santander. American Express can now connect with customers across the globe through Ripple’s payments network. (Read: American Express Launches Blockchain Payment Platform)
The Boeing Company BA has secured an order from Avolon — the international aircraft leasing company — for 75 of its 737-MAX airplanes. Following the signing of memorandum of understanding at the Paris Air Show in June, the deal has been finally awarded during the 2017 Dubai Air Show.
The agreement comprises an order for 55 MAX 8 and 20 MAX 10 airplanes — the newest and largest member of the 737 MAX family — including purchase rights for 20 additional MAX 10 jets. Valued at nearly $11 billion at current list prices, the deal represents the largest single order till date that the company has placed with Zacks Rank #3 Boeing. Given the size of the deal, Avolon is expected to get a discount on the list price of the aircraft. (Read: Boeing Secures $11B Order for 75 737-MAX Airplanes)
Johnson & Johnson JNJ and partner GlaxoSmithKline GSK announced FDA approval for Juluca, a two-drug complete regimen of Tivicay/rilpivirine and Edurant/dolutegravir as a single tablet for the treatment of HIV-1 infection.
Juluca’s approval was based on data from two phase III SWORD studies. Data from these studies published in February this year showed that the combination of dolutegravir/rilpivirine antiretroviral was as effective as a three- or four-drug antiretroviral regimen as a maintenance therapy in HIV patients who have already achieved viral suppression. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
JPMorgan Chase & Co.’s JPM Swiss subsidiary has been sanctioned by Switzerland’s financial regulator, FINMA for money laundering and violating supervision laws. On Jun 30, 2017, FINMA had ruled JPMorgan for breaking anti-money laundering guidelines and breaching due diligence.
However, FINMA’s judgment against Zacks Rank #3 JPMorgan, if any, remains undisclosed because the banking giant has been actively trying to prevent the publication of the regulator’s decision. The matter came to light when recently the Federal Administrative Court published its ruling against JPMorgan, which it had issued on Nov 8, 2017.
The court document mentions facts about the initial ruling where JPMorgan’s subsidiary was considered guilty of money laundering. However, exact details of the wrongdoing are still shrouded in mystery.
Though, FINMA does not have the authorization to levy fines, it is allowed to confiscate a banking institution’s gains that it has realized unlawfully or enforce professional limitations on such institutions. JPMorgan has not commented on the ruling yet. (Read: JPMorgan Sanctioned by FINMA for Money Laundering)
Goldman Sachs Group GS CEO Lloyd Blankfein said the bank would base its European operations in Frankfurt and Paris post Britain’s planned exit from the bloc in 2019. Speaking to a French newspaper, Blankfein said that it would be upon the employees to decide which location they would relocate to. Blankfein also mentioned that the bank would need to hire more employees.
Britain is currently home to most of Goldman Sach’s European operations, with about 6,000 employees. Zacks Rank #3 Goldman Sachs has leased office space in a Frankfurt skyscraper that would enable it to hire about 1,000 people, significantly higher than the present employee count in office at Frankfurt. The bank already has office spaces in central Paris. (Read: Goldman Sachs Names Frankfurt & Paris as EU Hubs Post Brexit)
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 increased 0.5%.
Next Week’s Outlook
Stocks have recently been weighed down by concerns surrounding tax cuts, a trend which is likely to persist for the rest of the year. However, the economy continues to show resilience and earnings continue to remain strong. If most economic reports set for release next week, including the all important GDP report are encouraging in nature, stocks are likely to return to their winning ways.
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