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Dow 30 Stock Roundup: Boeing Q4 Deliveries Up Y/Y, Success for Merck’s Keytruda Combo


The Dow endured a volatile week during which the index hit a fresh record high. A fall in bank shares led to losses for the index on Monday. The index slipped on Tuesday following positive news from a major component. Surging treasury yields led to losses for the index on Wednesday. Ultimately, the index surged to a record high on Thursday following investor optimism over economic growth.

Last Week’s Performance

The Dow gained 0.9% last Friday due to optimism built around the implementation of the GOP Tax Bill. Such broad-based gains ensured an improvement for three major benchmarks, negating the effects of dismal economic data.

Nonfarm payrolls for the month of December came in at 148,000, lower than the consensus estimate of 190,000 job additions. Further, the U.S. trade deficit increased 3.2% in November to settle at $50.5 billion. This is its highest deficit since January 2012. The ISM Services Index for December declined 1.5 points to 55.7%.

The index added an impressive 220.7 points on Friday to finish the session above the 25,000 milestone for the second straight day. This marked its third-straight record close in last four trading sessions — its best opening week since 2006. Gains for the blue-chip index were rather broad based.

Over last week, the index gained 2.3%. This marked the Dow’s best weekly run since Dec 1, 2017. During this period the Dow touched the psychological level of 25,000 for the first time. This was the index’s fastest 1,000-point rise since its inception in May 1896.

Optimism over strong market performance in 2018 contributed to these gains. Favorable economic data, including an upbeat manufacturing report and record construction spending boosted markets.

The Dow This Week

The index lost almost 0.1% or nearly 13 points on Monday due to a fall in bank shares that snapped its winning run. This marked an end to its four-day streak of gains. The blue-chip index hit an intraday record of 25,311.99 earlier in the session but suffered broad based losses to finish in the negative territory.

Shares of major banks such as The Goldman Sachs Group, Inc. GS and JPMorgan Chase & Co. JPM declined by 1.5% and about 0.4% respectively and weighed on the Dow. Bank shares declined after analysts estimated that there would be one-time charges to the fourth quarter earnings that the banks would suffer due to the implementation of tax reforms.

The index increased 0.4% on Tuesday following reports that The Boeing Company BA had delivered a record number of airplanes in 2017 pushed the Dow into record territory. Such events led to shares of Boeing gaining 2.7%, which contributed as much as 57 points to the Dow.

The blue-chip index amassed 120.8 points to finish at a record 25,385.80. What also contributed to Dow’s gains was increase in the shares of Johnson & Johnson JNJ, which gained 1.6% and added 15 points to the Dow.

The index lost 0.1% on Wednesday after yields on the 10-year benchmark note surged following reports that China was considering halting purchase of U.S. Treasuries. Markets also suffered losses after reports from Canada surfaced that its government expects Trump to pull out of NAFTA soon. Meanwhile, cost of imported goods in the United States surged to a six year high.

The index gained 0.8% or 205 points on Thursday hitting another all-time high following investor optimism over economic growth. Shares of Boeing gained 2.4%, emerging as the largest contributor for the Dow. The aircraft manufacturer will likely be one of the major beneficiaries of higher economic growth. Meanwhile, the PPI index declined by 0.1%, moving lower for the first time in more than a year.

Components Moving the Index

Boeing’s 2017 deliveries show a 2% rise in commercial shipments and 5.9% decline in defense shipments, on a year-over-year basis. The company reported commercial deliveries of 763 jets in 2017, up on higher 737, 747 and 767 deliveries. The figure was within the company’s delivery guidance of 760 to 765.

In 2017, Zacks Rank #3 (Hold) Boeing delivered 529 models of the 737 airplanes, followed by 136 deliveries of the 787 model. Boeing delivered 74 units of the 777 model in 2017, compared with 99 units a year ago. Other deliveries include 10 767s and 14 747s, compared with 13 and 9 units, respectively.

In the defense and space business, Boeing’s deliveries were 174 in 2017, down from 185 a year ago. Total deliveries consisted of 68 AH-64 Apache helicopters (both new and remanufactured) and 44 Chinook helicopters (new and renewed). (Read: Boeing's Q4 Commercial & Defense Jet Deliveries Up Y/Y)

Meanwhile, Boeing’s Defense, Space and Security unit recently secured a modification contract worth $193.6 million for the production of Increment 1, Lots 12-14 Small Diameter Bomb (SDB). Per the terms of the deal, the company will purchase an additional quantity of 6,000 SDBs. (Read: Boeing Wins $193M FMS Deal to Build Small Diameter Bomb)

Apple Inc. AAPL announced that it is working on features that will provide increased parental control over smartphone usage of children. The announcement was made following apprehensions from Apple’s shareholders Jana Partners LLC and the California State Teachers’ Retirement System regarding the role of the company in shaping a child’s future.

Per Bloomberg, Zacks Rank #3 Apple, in response to the criticism, also mentioned that since 2008 iPhone and other Apple products running on iOS have been offering parents tools that enable them to control what their children can access.

The company also offers an Ask to Buy feature that requires consent of parents to buy goods and services, adds Bloomberg. The company is focusing on making vigilance stricter with the new tools. (Read: Apple Developing Tools to Increase Parental Control)

Merck & Co., Inc. MRK and Japanese partner Easai Co., Ltd announced that the FDA has granted breakthrough therapy designation (“BTD”) to the combination regimen of Zacks Rank #3 Merck’s anti-PD-1 therapy, Keytruda, and Easai’s multiple receptor tyrosine kinase inhibitor, Lenvima.

The companies are developing the combination as a potential treatment for advanced and/or metastatic renal cell carcinoma (“RCC”) or kidney cancer. This is the 12th BTD for Keytruda and second for Lenvima.

The designation aims to expedite the development and review of drugs intended to treat serious or life-threatening conditions and provide patients access to these as soon as possible. (Read: Merck's Keytruda Combo Gets Breakthrough Therapy Status)

Meanwhile, Merck announced that a phase III study evaluating its anti-PD-1 therapy, Keytruda as monotherapy for the treatment of high-risk melanoma met the primary endpoint of recurrence-free survival (RFS). (Read: Merck's Keytruda Succeeds in High-Risk Melanoma Study)

Chevron Corporation's CVX efforts to divest its stake in its South Africa business to China Petroleum & Chemical Corporation SNP, better known as Sinopec, has been approved by the country’s Competition Commission.

Notably, Sinopec will acquire 75% stake in the assets through its subsidiary, SOIHL Hong Kong Holding Limited. With the completion of the deal, SOIHL — a manufacturer and supplier of petroleum and petrochemical products — will enter the South African petroleum market. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Pfizer, Inc. PFE reportedly said in a statement that it will end R&D efforts in the Alzheimer’s and Parkinson’s disease areas, which will result in about 300 layoffs. The decision to end the neuroscience-discovery program will mainly affect employees at facilities in Andover and Cambridge, MA, and Groton, CT.

Zacks Rank #3 Pfizer, however, intends to continue development of pain candidate, tanezumab, which it is developing in late-stage studies in partnership with Eli Lilly LLY, label expansion efforts for pain drug Lyrica and its rare disease program. (Read: Pfizer to Stall R&D for Alzheimer's/Parkinson's, Cut Jobs)

The Coca-Cola Co.’s KO affiliate in Chile and local bottlers of the brand entered into an agreement to buy Comercializadora Novaverde SA. The move is in line with its strategy to invest in newer revenue generating platforms. The company specializes in juices, canned fruits and vegetables, mainly under the brand Guallarauco. Coca-Cola has a Zacks Rank #3.

Embotelladora Andina, Embonor, Coca-Cola del Valle New Ventures, and Coca-Cola de Chile entered into a stock purchase agreement under which 100% ownership of Comercializadora Novaverde shares will be transferred.

On completion of the deal, while Coca-Cola del Valle New Ventures will own 2,999,994 shares, Coca-Cola de Chile and Embotelladora Andina will own three and two shares, respectively. Embonor will gain the ownership of one share.

Embotelladora Andina’s direct and indirect ownership in Novaverde will be approximately 35%, as it is already a shareholder of Coca-Cola del Valle New Ventures. The deal is valued at $80 million, according to a Reuters report. (Read: Coca-Cola Chilean Arm to Buy Novaverde, Diversifies Portfolio)

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 1.2%.

Next Week’s Outlook

Despite recent hiccups, markets continue to be fueled by expectations of strong economic growth and bullish fourth quarter earnings. Recently released data on manufacturing and construction have also borne out such sentiments. Several economic reports are lined up for release over the next few days. These releases will reveal critical insights on retail sales, industrial production and housing. If most of these reports are encouraging in nature, markets are likely to maintain their upward trajectory in the week ahead.

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