The index enjoyed a strong week overall, bolstered by encouraging earnings. An end to the longest government shutdown in history also brought the much-needed relief to market participants. Meanwhile, the Federal Reserve maintained the federal funds target rate and adopted a dovish approach, boosting markets further.
Last Week’s Performance
The index gained 0.8% last Friday as markets breathed a sigh of relief after the longest government shutdown in history came to an end. Meanwhile, expectations that the Fed will not raise the federal funds rate in its next meeting also boosted markets. Finally, China’s decision to boost its slowing economy also proved to be one of the catalysts which boosted stocks.
The index gained 0.1% last week, posting its fifth straight week of gains. Upbeat earnings results throughout the holiday-shortened week boosted markets. Meanwhile, the partial government shutdown continued to be another cause of worry for market participants.
Also, trade related tensions between the United States and Chins kept investors on tenterhooks. However, Trump’s decision to end the longest-ever shutdown in U.S. history brought the much-needed relief to investors.
The Dow This Week
The index declined 0.8% on Monday after Caterpillar Inc. CAT posted dismal for fourth-quarter earnings. Caterpillar’s shares dipped 6% in pre-market trading as results fell short of expectations. Meanwhile, Trump stated he was doubtful that a border-wall funding deal would be reached and shutdown fears reemerged.
The index gained 0.2% on Tuesday even as broader markets declined after trade war concerns escalated. Notably, 18 stocks of the 30-stocks blue-chip index finished in the green while 12 ended in red.
The index gained 1.8% on Wednesday after the Fed kept the federal funds target rate unchanged and adopted a dovish monetary stance. Fed Chairman Jerome Powell stated the central bank will be patient while taking a call on future rate hikes.
Moreover, strong fourth-quarter earnings results also lifted investors’ confidence. Shares of Apple Inc. AAPL and The Boeing Company BA surged 6.8% and 6.3%, respectively, after posting strong earnings numbers.
The index lost 15.19 points on Thursday to close marginally below the flatline on Thursday. However, the Fed’s new-found dovishness helped stocks post their most successful January in three decades. The Dow gained 7.2% over the last month to post its strongest January gains since 1989 and its largest monthly increase since 2015.
Components Moving the Index
Caterpillar delivered adjusted earnings per share of $2.55 in fourth-quarter 2018, lagging the Zacks Consensus Estimate of $2.98. However, the figure improved 18% year over year.
Revenues improved 11% year over year to $14.3 billion in the quarter under review, missing the Zacks Consensus Estimate of $14.4 billion.
Zacks Rank #3 (Hold) Caterpillar’s adjusted earnings per share in fiscal 2018 stood at $11.22, marking an improvement of 63% from the $6.88 reported in the prior fiscal. (Read: Caterpillar Q4 Earnings, Revenues Lag Estimates, Up Y/Y)
DowDuPont Inc. DWDP recorded earnings (on a reported basis) from continuing operations of 21 cents per share for fourth-quarter 2018. In the year-ago quarter it had incurred loss of 52 cents per share.
However, earnings missed the Zacks Consensus Estimate of 89 cents. Zacks Rank #3 DowDuPont raked in net sales of $20,099 million for the quarter, missing the Zacks Consensus Estimate of $21,105 million.
For 2018, net earnings from continuing operations were $1.65 per share, up from 95 cents per share recorded in 2017. (Read: DowDuPont Lags Earnings & Revenue Estimates in Q4)
McDonald's Corporation MCD reported fourth-quarter 2018 adjusted earnings of $1.97 per share, which surpassed the consensus mark of $1.90 and increased 15% from the year-ago quarter number (18% in constant currencies). McDonald's has a Zacks Rank #3.
In the quarter under review, revenues of $5,163 million outpaced the Zacks Consensus Estimate of $5,159 million but decreased 3% year over year. (Read: McDonald's Earnings & Revenues Surpass Estimates in Q4)
Apple reported first-quarter fiscal 2019 earnings of $4.18 per share that beat the Zacks Consensus Estimate by a penny and increased 7.5% year over year. Apple has a Zacks Rank #5 (Strong Sell).
Net sales decreased 4.5% year over year (3% when adjusted for foreign exchange) to $84.31 billion, which surpassed the Zacks Consensus Estimate of $84.07 billion.
iPhone sales declined 15% from the year-ago quarter to $51.98 billion and accounted for 61.7% of total sales. The sales figure lagged the consensus mark of $52.27 billion.
Services — including revenues from cloud services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services — increased 19.1% year over year to $10.88 billion and accounted for 12.9% of sales. (Read: Apple Q1 Earnings Beat Estimates, Revenues Down Y/Y)
Boeing reported adjusted earnings of $5.48 per share for fourth-quarter 2018, which outshined the Zacks Consensus Estimate of $4.52 by 21.2%.
For 2018, Boeing’s adjusted earnings came in at $16.01 per share, which surpassed the Zacks Consensus Estimate of $15.06 by 6.3%.
The company's revenues amounted to $28.34 billion, which exceeded the Zacks Consensus Estimate of $26.65 billion by 6.3% and improved 14% year over year.
For 2018, Boeing generated sales of $101.13 billion, which outpaced the Zacks Consensus Estimate of $99.62 billion by 1.5%. 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.
3M Company MMM reported fourth-quarter 2018 adjusted earnings of $2.31 per share, surpassing the Zacks Consensus Estimate of $2.27. On a year-over-year basis, the bottom line increased 10%.
For 2018, Zacks Rank #3 3M’s adjusted earnings per share were $10.46, surpassing the Zacks Consensus Estimate of $9.94 and marking roughly 14.4% increase over the year-ago tally of $9.17.
3M’s net sales were $7,945 million, reflecting a decline of 0.6% from the year-ago quarter. The top line surpassed the Zacks Consensus Estimate of $7.94 billion.
For 2019, 3M revised down the adjusted earnings guidance from $10.60-$11.05 to $10.45-$10.90 per share. (Read: 3M Beats Q4 Earnings Estimates, Revises '19 View Down)
Microsoft Corporation MSFT delivered second-quarter fiscal 2019 earnings of $1.10 per share, which beat the Zacks Consensus Estimate by a penny. The figure jumped 14.6% on a year-over-year basis. Microsoft has a Zacks Rank #3.
Revenues of $32.47 billion increased 12% from the year-ago quarter (up 13% in constant currency or cc). The figure was almost in line with the Zacks Consensus Estimate of $32.45 billion. (Read: Microsoft Q2 Earnings Top Estimates, Revenues Up Y/Y)
Pfizer, Inc. PFE reported fourth-quarter 2018 adjusted earnings per share of 64 cents, which beat the Zacks Consensus Estimate by a penny. Earnings rose 3% year over year. Pfizer has a Zacks Rank #4 (Sell).
The pharma heavyweight recorded revenues of $14.0 billion, which beat the Zacks Consensus Estimate of $13.77. Revenues rose 2% from the year-ago quarter on a reported basis.
Full-year 2018 sales rose 2% to $53.65 billion, beating the Zacks Consensus Estimate of $53.42 billion. Revenues were within the guided range of $53.0 billion to $53.7 billion. (Read: Pfizer Q4 Earnings Beat, 2019 View Tepid, Stock Dips)
Verizon Communications Inc. VZ reported fourth-quarter 2018 adjusted earnings of $2,065 million or 47 cents per share compared with $18,783 million or $4.57 per share in the year-ago quarter. Verizon has a Zacks Rank #3.
Excluding non-recurring items, adjusted earnings were $1.12 per share compared with 86 cents in the year-ago quarter and beat the Zacks Consensus Estimate of $1.09. (Read: Verizon Beats on Q4 Earnings, Misses Revenue Estimates)
Visa Inc. V reported first-quarter fiscal 2019 (ended Sep 30, 2019) earnings of $1.30 per share, beating the Zacks Consensus Estimate by 4%. Also, the bottom line improved 21% year over year. Visa has a Zacks Rank #3.
Net operating revenues of $5.5 billion beat the Zacks Consensus Estimate by 2% and were up 13% year over year. (Read: Visa's Q1 Earnings Surpass Estimates on Revenue Growth)
Performance of the Top 10 Dow Companies
The table given below shows the price movement 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 past five trading days, the Dow has gained 2.4%.
Next Week’s Outlook
With the government shutdown coming to an end, investors have one less headwind to worry about. It is unlikely that this episode will be repeated after the stipulated three-week period of negotiations elapses.
Further, the Fed’s newly found dovish stance is pushing stocks higher. If the United States and China are able to provide an outline for a long-standing trade agreement after this week’s two-day meeting, markets could enjoy an unimpeded ascent in the days ahead.
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