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Dow 30 Stock Roundup: American Express Buys InAuth, Visa Inks Deal with Wal-Mart

Zacks

The Dow declined over the week even as investors were disappointed by Donald Trump’s first news conference in months. The President elect provided few details about how he would go about executing his economic promises. Instead, he chose to lash out at exorbitant drug prices and at U.S. spy and news agencies over what he called a 'phony' Russia dossier. Oil prices continued to remain volatile and exerted a significant impact on energy shares as well as the broader market.

Last Week’s Performance

The Dow increased 0.3% last Friday following a solid December U.S. jobs report. The U.S. added 156,000 jobs in December, below the consensus estimate of 178,000 job additions. But, a sharp upward revision of November’s job numbers and a slight trimming of October’s job numbers indicated that employment growth was more or less in line with broader expectations.

Steady gains in employment have pushed workers’ pay higher, with average hourly wages climbing 0.4% in December. This in turn pushed the annual gain last year to 2.9%, the fastest rise since the economy started to recover in mid-2009.The unemployment rate, meantime, ticked up to 4.7% from 4.6% in November, matching the consensus expectation. Meanwhile, the U.S. trade deficit increased about 7% in November as imports touched the highest level in almost a year.


The index gained 1% over last week. Benchmarks closed in positive territory for the week following encouraging auto sales data and release of Fed minutes. Additionally, encouraging manufacturing and construction spending data had a positive impact on investor sentiment.

The Dow This Week

The index lost 0.4% on Monday led by declines in energy shares. A decline in oil prices dragged energy shares down. Oil prices tumbled almost 4% on Monday after record Iraqi crude exports raised concerns that OPEC’s initiative to trim abundant supply of oil would be undermined. Rise in active U.S. oil rigs also hinted at further increase in crude production levels. According to Baker Hughes Incorporated (BHI) the number of active U.S. rigs drilling for oil jumped by 4 to 529 rigs last week, marking the tenth weekly climb in a row.

The index declined again on Tuesday, moving 0.2% lower as investors mostly remained cautious ahead of a news conference by President-elect Donald Trump, to be held on Wednesday, his first since being elected on Nov 8. Beyond Trump’s comments, investors also eagerly awaited the commencement of the earnings season and whether it could provide some support to the recent Trump-induced market rally.

The index increased 0.5% on Wednesday following President-elect Donald Trump’s first news conference in months. Energy shares were among the day’s biggest gainers, thanks to rise in oil prices. OPEC’s decision to trim production levels along with expectations of strong demand growth in China helped oil prices move north. Healthcare shares, on the other hand, finished in the red after Trump said that pharma companies are “getting away with murder” by charging exorbitant drug prices.

The index closed lower on Thursday, losing 0.3% Thursday after President-elect Donald Trump provided little clarity on economic policies during his first news conference on Wednesday. Trump offered no details on tax cuts and infrastructure outlays that had powered a record-breaking rally over the last two months. Investors began to question the run-up in stock prices following Trump’s promises of fiscal stimulus measures even as they gear up for the start of the earnings season.

Components Moving the Index

American Express Company AXP acquired Boston, MA-based mobile device authentication and intelligence solutions provider, InAuth, Inc. Zacks Rank #3 (Hold) rated American Express, as part of its fraud management capabilities, already uses InAuth’s technology. The latest acquisition follows an investment in InAuth, made earlier this year, by a strategic investment wing of American Express. (Read: American Express Buys InAuth to Boost Digital Security)

In a separate development, last week, American Express released the delinquency and write-off rate statistics for its U.S. Consumer Services (USCS) and U.S. Small Business card member loans, for the month of Nov 2016.

Total USCS card member loans increased 2.6% from the preceding month and 4% from the prior-year period to $46.7 billion in Nov 2016. The 30-day plus delinquency rate remained unchanged at 1.1%, from both the comparable periods. Net write-off rate for the month was 1.5%, down 10 basis points (bps), from the preceding month as well as year over year. (Read: American Express' Delinquency Rate Flat Y/Y in November)

Apple Inc. AAPL recently announced that its App Store generated record sales of more than $20 billion for developers in 2016, up almost 40% from 2015. According to The Wall Street Journal, the revenue figure was nearly $28.5 billion and the company collected almost $8.5 billion from these sales compared with roughly $6 million in 2015. Notably, Zacks Rank #3 rated Apple keeps 30% of all App Store sales. (Read: Apple's (AAPL) App Store Reports Record Sales for 2016)

Meanwhile, per media reports, declining iPhone sales have resulted in Apple cutting CEO Tim Cook’s compensation. As a result, Cook took home a compensation of $8.7 million in fiscal 2016, down 15% from $10.3 million received in fiscal 2015. (Read: Apple (AAPL) Slashes CEO Tim Cook's Compensation by 15%)

The Boeing Company BA has received an order for three Next-Generation 737-800 airplanes from South Korea-based Jeju Air, Korea's first low-cost carrier which was established in 2005 and began operations in 2006. The value of the airplanes at current list prices comes to nearly $300 million. (Read: Boeing Wins Order for Next-Gen 737-800 Jets from Jeju Air)

In another development, Boeing reported 2016 deliveries, which show that both commercial and defense shipments were down 1.8% and 2.6%, respectively, on a year-over-year basis. The stock holds a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McDonald’s Corporation MCD recently entered into a strategic partnership with CITIC Limited, CITIC Capital Holdings and The Carlyle Group LP (CG) to form a master franchisee company in charge of Zacks Rank #3 rated McDonald's operations in mainland China and Hong Kong.

Total consideration of around $2.1 billion will be payable by the newly formed company to purchase McDonald’s China division. The amount will be settled partly in cash and partly by issuing shares in the new company to McDonald’s.

Post the completion of the transaction, CITIC and CITIC Capital will have a controlling stake of 52%, Carlyle will hold 28% while McDonald’s share will be brought down to 20%. (Read: McDonald's (MCD) Reduces Stake in China Division to 20%)

Visa Inc. V has finally reached an agreement with Wal-Mart Stores, Inc. WMT, which would allow acceptance of Visa credit cards as a form of payment in all Canadian Wal-Mart stores. The latest move undoubtedly seems to put an end to the lingering tussle over credit card transaction fees between the payment network giant and the retail behemoth. Visa has a Zacks Rank #3. (Read: Visa Inks Deal with Wal-Mart, Lifts Credit Card Ban in Canada)

Wal-Mart Stores reported that it will eliminate about 1000 jobs this month, mostly in the human resources department, as the company is struggling with rising expenses. This move is in sync with the retail giant’s efforts to streamline its stores and make them more efficient. The stock has a Zacks Rank #4 (Sell). (Read: Wal-Mart (WMT) Announces Job Cuts to Bring Down Expenses)

Merck & Co., Inc.’s MRK supplemental Biologics License Application (sBLA) for its anti-PD-1 therapy, Keytruda, has been accepted under priority review by the FDA. Note that this is the first sBLA filing for Keytruda as combination therapy. Also, if approved, it would be the first treatment option to combine chemotherapy with an immuno-oncology agent for the treatment of advanced lung cancer. With the FDA granting priority review, a response should be out by May 10, 2017. The sBLA will be reviewed under the FDA’s accelerated approval program. Merck has a Zacks Rank #3. (Read: Merck: Keytruda+Chemo Gets Priority Review for Lung Cancer)

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

NA

-1%

GS

+1.1%

+54.4%

IBM

-0.2%

+6.3%

HD

+0.5%

+1.1%

BA

-0.5%

+21.7%

UNH

+0.5%

+14.8%

MCD

+3.1%

-0.6%

TRV

+0.1%

-0.6%

JNJ

-2.3%

-6.8%

AAPL

+1.7%

+23.1%

Next Week’s Outlook

Investors expectations had built up around the President-elect’s first news conference in months. Now that they have been dashed, investors will await further signals from the new administration on details about its likely policies. These will surely have a majorimpact on market proceedings in the days ahead. However, markets seem to have lost some of the enthusiasm gained since election results were declared. In such an event, stocks will look at other factors for direction next week.

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