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Dow 30 Stock Roundup: Visa to Buy Verifi, Goldman May Launch Own Cryptocurrency

Swarup Gupta

The index enjoyed a holiday-shortened but successful week, buoyed by rate cut hopes and a reduction in trade tensions. Presidents Trump and Xi agreed to restart stalled trade talks at the G-20 summit in Japan, stoking investors’ hopes of a near-term trade deal. On the other hand, dismal economic data, specifically on private payrolls, raised hopes that a rate cut would be announced in July.

Last Week’s Performance

The index gained 0.3% on Friday, buoyed by strong performance of bank stocks after the Fed released results of the second round of stress tests. However, the Dow declined 0.5% over last week. Wall Street plummeted as uncertainty rose over the possibility of a rate cut by the Fed in July and the outcome from the upcoming meeting between presidents Trump and Xi.

The Dow jumped 7.2% last month, marking its best June since 1938. The Fed was largely responsible for June’s rally. The Fed Chair and other senior members of the central bank have hinted that they could adopt a softer approach to policy. Market watchers now think it is likely that one or more rate cuts will take place this year.

The index gained 2.8% in the second quarter. After slipping initially following a rise in trade tensions, markets ended the quarter on a strong note on rate cut hopes. Overall, the Dow gained 14% during 1H19. Hopes of a trade truce and the Fed’s dovish monetary stance are major reasons for Wall Street’s rally.

The Dow This Week

The index gained 0.4% on Monday buoyed by a lull in trade tensions between the United States and China. On Jun 29, presidents Trump and Xi agreed to restart trade negotiations in a meeting at the G-20 summit. Moreover, OPEC and Russia jointly agreed to extend crude oil production cut in order to stabilize prices.

The index gained nearly 0.3% on Tuesday after President Donald Trump told reporters that discussions with China on trade had “already begun.” However, gains were capped after the United States threatened new tariffs on European Union products. A plunge in bank shares also curbed the upside for stocks.

The index gained almost 0.7% on Wednesday in the holiday-shortened session. In the process, it hit both intra-day and closing record highs. Dismal private payrolls data, which came in well below analyst expectations, raised hopes of a near-term rate cut, resulting in the day’s record gains.

Components Moving the Index

Visa, Inc. V has signed an agreement to buy Verifi, a provider of payment protection and management solutions.

With Verifi, Visa intends to reduce chargeback and give buyers and sellers intelligent, data-driven tools that foster collaboration, build trust, and improve the overall customer experience.

A chargeback is a transaction that a cardholder (the shopper) has disputed and that has been reversed (i.e. refunded to the cardholder) by the card holder’s bank (also called the issuing bank). 

This buyout will help Visa to reduce fraud and risks involved in payments via cards and make them more secure and reliable. In this vein, the company, has in past, acquired CardinalCommerce and CyberSource.

Notably, both companies specialize in managing fraud and securing payments. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Pfizer Inc. PFE announced top-line results from a late-stage study, which evaluated its PDE4 inhibitor, Eucrisa (crisaborole ointment, 2%), for the treatment of mild-to-moderate atopic dermatitis (AD) or eczmema in children aged three months to two years.

The steroid-free topical treatment is already approved for eczema in patients aged two years and older in the United States and Canada. The drug is also marketed in Israel and Australia under the brand name Staquis for the given patient population.

The phase IV CrisADe CARE 1 study showed that Eucrisa was well tolerated over a four-week regimen and its safety profile was consistent with previous clinical studies. Zacks Rank #3 (Hold) Pfizer plans to present detail results from this label expansion study at an upcoming scientific conference. (Read: Pfizer's Eucrisa Proves Safety in Kids with Atopic Dermatitis)

Goldman Sachs GS has plans to enter into the lucrative digital currency market. CEO David Solomon, in an interview to the French newspaper Les Echos last week, said that the company “absolutely” intends to launch its own cryptocurrency.

Solomon further stated, “Assume that all major financial institutions are looking at the potential of tokenization, stable coins and frictionless payments.” This is expected to lower costs and help serve clients better.

Zacks Rank #3 Goldman is undertaking “extensive research” on tokenization and stable coins. Further, Solomon believes that the future of payment systems will likely be based on blockchains. (Read: Goldman Sachs to Foray Into Digital Currency Market)

The Boeing Company BA recently secured a $42.9-million contract to procure 48 trailing edge flaps for the F/A-18 aircraft. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.  Majority of the work related to this deal will be performed in St. Louis, MI, and the entire task is expected to be completed by June 2021.

Zacks Rank #3 Boeing continues to witness solid demand for its fighter aircraft and major aerospace programs, including the F-18. This is evident from a recently awarded $41-million contract to provide 2,763 pieces of support  equipment, spares and test equipment for the maintenance and repair of the F/A-18E/F aircraft. (Read: Boeing Wins $43M Deal to Provide Edge Flaps for F/A-18 Jets)

The Coca-Cola Company KO and Monster Beverage Corporation MNST recently settled a dispute over the launch of Coca-Cola Energy last April. The disagreement, continuing since last October, was sparked as Monster Beverage believed Zacks Rank #3 Coca-Cola violated the terms under an initial agreement between them. Monster Beverage apprehended that this energy drink puts the two companies in direct competition.

However, an arbitration tribunal of the American Arbitration Association cleared that the roll out and sale of Coca-Cola Energy is permitted under to the terms of Coca-Cola’s contract with Monster Beverage.

It further stated that the Coca-Cola Energy products are exempted according to the non-compete provision for beverages marketed or positioned under the Coca-Cola brand. The ruling allows Coca-Cola to sell its own energy drinks in markets where it has been launched as well as in new markets across the globe. (Read: KO to Sell Its Own Energy Drinks, MNST's Objection Ruled Out)

Johnson & Johnson JNJ announced that its subsidiary, Janssen, has received approval from the FDA for label expansion of its blockbuster drug, Darzalex. Johnson & Johnson has a Zacks Rank #3.

The latest approval is for Darzalex in combination with Celgene’s CELG Revlimid (lenalidomide) and dexamethasone (Rd) to treat newly diagnosed multiple myeloma (“MM”) patients ineligible for autologous stem cell transplant (“ASCT”).

A combination of Darzalex — Takeda’s (TAK) Velcade (bortezomib), melphalan and prednisone — is already approved for transplant ineligible MM patients in the first-line setting. The recent approval is Darzalex’s sixth FDA approved indication in multiple myeloma and the second for newly diagnosed patients. (Read: J&J's Darzalex Gets FDA Nod for First-Line Multiple Myeloma)

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 past six months. Over the last five trading days, the Dow has gained 1.4%.

Next Week’s Outlook

Over the past trading week, markets are continuing to build on the record gains enjoyed in June. The ascent of stocks has largely been fueled by rate cut and trade deal hopes. Next week, the focus will squarely shift toward the Fed’s two-day meeting. In case Friday’s official jobs data is in line with private sector jobs data, rate cut hopes would rise further, leading to further gains for stocks.

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Johnson & Johnson (JNJ) : Free Stock Analysis Report
Pfizer Inc. (PFE) : Free Stock Analysis Report
The Boeing Company (BA) : Free Stock Analysis Report
Coca-Cola Company (The) (KO) : Free Stock Analysis Report
Monster Beverage Corporation (MNST) : Free Stock Analysis Report
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
Celgene Corporation (CELG) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
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