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Dow 30 Stock Roundup: P&G Hikes Dividend; Boeing, American Airlines Ink $12B Deal


The Dow enjoyed a week of strong gains as trade war and Syria related fears receded. President Trump indicated that trade disputes should be resolved through discussions. Meanwhile, China’s President Xi Jinping pledged to open up China’s economy further. Trump also indicated that a military strike on Syria was not imminent. As a result, investors chose to focus on upcoming bank earnings as financials gained.

Last Week’s Performance

The Dow declined 2.3% on last Friday as increasing worries of a trade war brewing between the United States and China led to a huge selloff. Moreover, equities hit their session lows in the final two hours of trading after Fed Chairman Jerome Powell said the U.S. central bank would keep increasing interest rates to curb inflation.

The Dow tanked 0.7% over last week on escalating trade war related tensions between U.S. and China. The volatile week started on a low as China announced tariffs of $3 billion on U.S. goods including pork, apples and dry fruit. Markets gained traction after White House gave an indication that the U.S. government would not want to enter into a trade war with China.

Notably, Thursday was also the first day on NYSE since March 2013 when new 52-week highs outnumbered 52-week lows. Powell’s statement that the U.S. bank would keep increasing interest rates to keep inflation in control once again made investors jittery.

The Dow This Week

The index gained 0.2% on Monday as trade war tensions eased to some extent after officials from President Trump’s administration said trade disputes with China could be resolved through discussion. Such comments helped stocks rally almost throughout the trading session.

However, stocks pared most of the day’s gains shortly before the market closed on news of Federal Bureau of Investigation (FBI) raiding the office of Trump’s personal lawyer, Michael Cohen.

The index increased 1.8% on Tuesday after Chinese President Xi promised to take measures to open the country’s economy and cut import tariffs. Investors’ confidence rebounded as fears of a trade war eased to some extent, which saw stocks rallying almost throughout the trading session.

Moreover, shares of Facebook, Inc. FB too jumped after the company’s CEO Mark Zuckerberg testified in front of the Congress following news of a data misuse scandal involving millions of users.

The index declined 0.9% on Wednesday following President Donald Trump’s tweet warning Russia of a possible military strike on Syria. Escalating geopolitical tensions between the United States and Russia saw investors taking a defensive stance, with U.S. stocks tumbling and safe havens rallying.

The decline was led by bank stocks such as Citigroup Inc. C, The Goldman Sachs Group, Inc. GS and Morgan Stanley MS. However, shares of Facebook increased as the company’s CEO continued his testimony in front of Congress for the second day.

The index gained 1.2% on Thursday after investors ignored geopolitical tensions and chose to focus on the upcoming earnings season. Investor concerns receded after Trump tweeted saying that a military strike on Syria was unlikely in the near future. Financials were the best performers of the day as investors focused on upcoming bank earnings.

Components Moving the Index

The Procter & Gamble Company PG or P&G’s board of directors declared a 4% hike in its quarterly cash dividend to 71.72 cents per share, in a bid to impress investors. The dividend will be paid on or after May 15, 2018 to shareholders of record as of Apr 20, 2018. The new figure will add up to an annual dividend of $2.8688 per share.

Zacks Rank #4 (Sell) P&G is considered to be one of the dividend aristocrats in the S&P 500 Index, given its consistent increase in dividends each year in its span of operations of more than 100 years in business. This, along with a dividend yield of more than 3% (3.53% as of Apr 10, 2018) helped P&G to attain the position. (Read: Procter & Gamble Rewards Shareholders With 4% Dividend Hike)

Apple AAPL lures in users by unveiling red iPhone 8 and 8 Plus, which goes on sale on Apr 10 and will be available in stores from Friday Apr 13 onward. Apple has a Zacks Rank #4.

Reportedly, the company has labeled the devices with same price tags as other regular models, which are $699 for iPhone 8 and $799 for 8 Plus. The new device is expected to offset weakness arising from lackluster sales of the premium iPhone X.

iPhone, since its launch in 2007, has been the mainstay of the tech giant’s revenues. However, the spurt in revenues from iPhone in the last quarter was owing to higher iPhone average selling price when total shipments witnessed a decline. Lower-than-expected sales of iPhone X have been a dampener for the company. Ever since, analysts have been slashing sales estimate for the product. (Read: Apple Launches Red iPhone 8 and 8 Plus to Boost Sales)

The Boeing Company BA recently secured a contract to deliver 47 787-Dreamliner aircrafts to American Airlines, the world’s largest airline. Per the terms, the airline will receive 22 787-8 and 25 787-9 Dreamliners from Boeing to expand and modernize its fleet.

This deal is expected to open new routes for American Airlines across the globe, including Europe and Asia Pacific region. The deal is valued at more than $12 billion at current list prices and will make the airline Boeing’s largest 787-Dreamliner customers in Western Hemisphere. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chevron Corp. CVX recently divested its stake in the Elk Hills field in California's San Joaquin Basin to the upstream player California Resources Corp. CRC, in a cash-stock deal. With the deal, California Resources secured full ownership in the historic Elk Hills field.

Per the deal, Zacks Rank #3 (Hold) Chevron has offloaded its non-operated working interest of around 20-22% in the field for a cash consideration of $460 million along with 2.85 million issued shares of California Resources. In 2017, the divested region accounted for the production of 13,300 barrels of oil equivalent per day (Boe/d) — comprising 46% oil, 45% natural gas and 9% natural gas liquids — to Chevron. (Read: Chevron Sells Stakes in Elk Hills Field in a Cash-Stock Deal)

McDonald's Corporation MCD is likely to open 200 restaurants in the Nordic region over the next decade, per media reports, in a bid to attract customers. Meanwhile, Zacks Rank #4 McDonald’s seems to be increasingly focusing on delivery services in order to cater to its customers' needs in a better way. It is expected to begin home deliveries in the Nordic region from this year.

In Sweden and Finland, McDonald’s will start home delivery services from May onwards, while in Denmark and Norway in the latter half of 2018. In Denmark, Sweden, Norway as well as Finland the company serves 150 million customers a year and has nearly 430 restaurants in the region. (Read: McDonald's Plans to Open Restaurants in Nordic Regions)

Merck & Co., Inc. MRK announced data from a phase III study which showed that treatment with its PD-1 inhibitor, Keytruda monotherapy led to significantly improved overall survival (OS) as a first-line therapy in certain lung cancer patients. Merck has a Zacks Rank #3.

The pivotal KEYNOTE-042 study evaluated patients with locally advanced or metastatic nonsquamous or squamous non-small cell lung cancer (NSCLC) whose tumors express PD-L1 protein levels of 1 percent or greater (TPS of ≥1 percent). In such patients, Keytruda showed a significant survival benefit compared with platinum-based chemotherapy.

If the OS data from KEYNOTE-042 study are approved to be included in Keytruda’s label, the drug can be prescribed to treat an expanded lung cancer patient population, further reinforcing its position in the lung cancer market. (Read: Merck's Keytruda Offers Survival Benefit in Lung Cancer Study)

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 1.5%.

Next Week’s Outlook

With trade war and Syria related fears receding into the background, investors will be able to better focus on upcoming earnings. Bank earnings are up for release first and it is widely expected that higher rates and lower taxes will boost results. Meanwhile, investors will continue to focus on economic releases scheduled for next week, including crucial reports on industrial production and retail sales.

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