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The index chalked up gains this week amid renewed hopes of trade talks between the United States and China. Tech shares staged a strong rebound with semiconductor stocks leading the rally initially. Shares of Apple, Inc. AAPL suffered both gains and losses over the week even as the company unveiled three new iPhones. Lower-than-expected CPI numbers also helped to boost consumer sentiment.
Last Week’s Performance
The index declined 0.3% last Friday after President Donald Trump said that the United States was ready to move ahead with tariffs on an additional $267 billion worth of Chinese goods. Also, Apple said tariffs could affect some of its products.
These developments reignited trade war fears resulting in huge selloffs, led by tech stocks. Also, the U.S. Labor Department’s employment report showed robust job growth, reflecting strength in the economy.
The index lost 0.2% over last week. It was a volatile week for markets, marking one of the worst starts to September, with tech stocks suffering the most. Trade war fears coupled continued to rattle markets throughout the week.
Moreover, large-cap tech stocks, especially Internet-based stocks sharply declined over the week on concerns of increased regulation on social media and Internet-based companies in order to check spreading misinformation and intervene in U.S. elections.
The Dow This Week
The index declined 0.2% on Monday even as markets ended a four-day losing streak after tech shares attempted to rebound. The rally was led by semiconductor stocks that tried to pare losses from last week. However, shares of Apple declined 1.3%, dragging the Dow into the red.
Meanwhile, on Friday, Trump said that the United States is ready to move ahead with tariffs on an additional $267 billion worth of Chinese goods. This once again ignited fears of trade war between the United States and China. Investors continued to feel jittery on Monday that affected the markets.
The index gained 0.4% on Tuesday, ending its two-day losing streak. Tech and energy stocks rallied, as trade war fears continued to linger. The tech rally was led by Apple, while a gain of more than 2% in oil helped energy stocks.
The Dow added 113.99 points, boosted by Apple and Exxon Mobil Corporation XOM. Shares of Apple jumped 2.5%, while Exxon Mobil and Chevron Corporation CVX gained 1.4% and 0.5%, respectively.
The index advanced 0.1% on Wednesday, posting small gains after paring early losses amid renewed hopes of possible trade talks between the United States and China. Meanwhile, Apple unveiled its new line of products.
The Dow advanced 27.86 points, with The Boeing Company BA and Caterpillar, Inc. CAT contributing to the rally. Shares of Boeing and Caterpillar gained 2.4% and 1.6%, respectively. However, shares of 3M Company (MMM) took a hit, plummeting 2.4%.
The index gained 0.6% on Thursday, sealing a three-day winning stretch. Reports that Beijing could be favorably disposed to Washington’s offer for talks helped stocks chalk up gains. As a result, trade sensitive shares like Boeing and Caterpillar gained 0.6% and 0.9%, respectively.
With August’s CPI numbers coming in under expectations, investor sentiment received a further boost. The Dow gained more than a 100 points powered by a 2.4% increase from Apple which launched new iPhones a day earlier. Shares of Microsoft Corporation MSFT gained 1.1%.
Components Moving the Index
Apple unveiled three new iPhones on Sep 12, confirming earlier rumors. The company also launched a redesigned Apple Watch that demonstrated Apple’s focus on providing healthcare services to its customers.
The iPhone Xs, priced at $999 (for 64 GB version), is powered by a faster A12 processor and updated cameras. The device has a screen size of 5.8 inches. The high-end iPhone Xs Max starts at $1,099 (for 64 GB version) and features a 6.5-inch OLED screen. The device has a 512 GB storage option.
Pre-order for both iPhone Xs and iPhone Xs Max will begin from Sep 14. The iPhone Xr, a cheaper version starting at $749 with an LCD screen size of 6.1inches, features the key aspects — facial recognition and an edge-to-edge display — of the inaugural iPhone X. As rumored, Apple used aluminum instead of stainless steel for the edges.
iPhone Xr comes in six new finishes — white, black, blue, yellow, coral and red. Pre-orders will begin from Oct 19 and the device will be available from Oct 26 in more than 50 countries including China and India. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boeing recently won a $2.85 billion contract for the production of the fourth lot of KC-46 aircraft, spares and support equipment. The contract came from the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, Ohio.
Per the terms, the contract modification provides for the exercise of an option for an additional quantity of 18 KC-46 aircraft, two spare engines, five wing refueling pod kits, initial spares, and support equipment.
With this lot, Zacks Rank #3 Boeing is on contract for 52 KC-46 tankers. Work related to the deal will be carried out in Seattle, WA; and is expected to be completed by January 2022. (Read: Boeing Clinches $2.9B Deal for KC-46 Aircraft Production)
Chevron is breathing a sigh of relief, as an international tribunal ruled in favor of the integrated oil giant regarding a pollution-related case in Ecuador. The international arbitrator court in The Hague echoed the verdict of U.S. Supreme Court in 2017, which immunized Chevron from the payment of a landmark $9.5-billion fine in relation to the Ecuador pollution case.
Post the U.S. Supreme Court ruling against Ecuador, the lawyers for the plaintiff decided to appeal in international courts. American lawyer Donziger and Ecuadorian plaintiffs’ hope of receiving $9.5-billion fine suffered a huge setback again, as the international tribunal was of the view that Ecuador violated its obligations under international treaties.
With the recent verdict, Zacks Rank #3 Chevron now stands to receive millions of dollars as economic compensation. The amount that Ecuador is required to pay to Chevron is likely to be settled in another three months. (Read: Chevron Emerges Victorious in Ecuador Pollution Case)
Merck & Co., Inc. MRK announced that a late-stage study evaluating its antibacterial drug, Zerbaxa for two types of pneumonia infections met the primary endpoints. Zerbaxa, a combination of ceftolozane and tazobactam, is presently marketed for some complicated urinary tract infections.
The pivotal phase III study evaluated Zerbaxa for new indications — ventilated hospital-acquired bacterial pneumonia (HABP) or ventilator-associated bacterial pneumonia (VABP).
Results from the study demonstrated non-inferiority of Zerbaxa to meropenem, the active comparator, thereby meeting the study’s primary endpoint. Based on these data, Zacks Rank #3 Merck plans to submit regulatory applications in the United States and EU to get approval for these new indications, which are serious hospital-related pulmonary infections. (Read: Merck's Antibacterial Drug Succeeds in Label Expansion Study)
Pfizer, Inc. PFE announced that a combination of its cancer drugs, Bavencio and Inlyta, significantly improved progression-free-survival (“PFS”) in a pivotal late-stage study. The phase III JAVELIN Renal 101 study evaluated the Bavencio/Inlyta combination against Pfizer’s older kidney cancer drug Sutent for first-line treatment of advanced renal cell carcinoma, the most common form of kidney cancer. Pfizer has a Zacks Rank #3.
Top-line results from the study showed that treatment with the Bavencio/Inlyta combination led to statistically significant improvement in progression-free survival (PFS) in patients whose tumors had PD-L1 expression greater than 1% as well as in the entire study population regardless of PD-L1 tumor expression. An independent Data Monitoring Committee confirmed the results as part of a planned interim analysis. (Read: Pfizer's Drug Combo Betters Survival in Kidney Cancer Study)
United Technologies Corporation UTX recently won a $437-million contract modification from the U.S. Air Force Life Cycle Management Center. Per the deal, the company’s Pratt & Whitney business arm will provide its state-of-the-art solutions to reduce adaptive propulsion risks in air-control applications. United Technologies has a Zacks Rank #3.
Per the aforementioned deal, Pratt & Whitney will offer its innovative adaptive propulsion technologies to the U.S. Air Force. This will include power and thermal management systems, as well as control systems that will assist in improving the persistence, survivability, range, and maintenance capabilities in advanced weapon systems. (Read: United Technologies Arm Wins U.S. Air Force's $437M Contract)
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 0.5%.
Next Week’s Outlook
News of fresh overtures from Washington to Beijing for fresh trade talks has gladdened investors. Reports that Chinese authorities have responded favorably have helped to sustain market momentum. A strong rebound in tech shares is also boosting indexes, led by gains posted by shares of Apple.
Investors have also been heartened by the lower than expected increase in the CPI index. Economic reports are likely to play a significant role in stock movement in the days ahead as well. Encouraging readings on retail sales and housing starts will help boost stocks further in the week ahead.
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