Dow 30 Stock Roundup: Disney Beats On Earnings, 3M Divests Operating Unit

The Dow declined over the week, dragged down by adverse events on the domestic front as well as geopolitical concerns. Emmanuel Macron’s victory helped the blue chip index inch higher on Monday. However, comments from North Korea sent the broader markets lower on Tuesday.

The index moved lower again on Wednesday after North Korea’s ambassador to the UK, Choe Il, said the country will proceed with its sixth nuclear test. Dismal earnings from key retail stocks led to losses for markets on Thursday.

Last Week’s Performance

The Dow advanced 0.3% last Friday on Friday following the release of better than expected April jobs data. The economy added 211,000 jobs in April, easily surpassing expectations of 193,000 additions. The unemployment rate declined marginally from 4.5% to 4.4% in April, marking its lowest level since May 2007.

Moreover, energy shares surged as oil prices recovered following Saudi Arabia’s statement that Russia has agreed to join OPEC in extending oil supply cuts. Investors also kept a close watch on the outcome of the final-round of the presidential election in France.

The Dow gained 0.3% last week. Leading companies continued to post strong performances in the earnings season. Consumer spending remained unchanged in March, whereas personal income increased $40.0 billion or 0.2% in March. Meanwhile, the U.S. auto industry reported disappointing sales in April, with sales hitting 16.88 million, below an expected annual rate of 17.2 million. Also, the trade deficit in March decreased to $43.7 billion.

The Dow This Week

The Dow inched higher on Monday even as Wall Street’s ‘Fear Gauge’ index touched its lowest level in almost two-decades after Emmanuel Macron won the French presidential election. Macron’s victory helped to alleviate geopolitical concerns over France’s possible exit from the European Union.

However, such a victory was widely anticipated and, as a result, all the three major indexes remained almost unchanged. Energy shares, meanwhile, registered gains due to uptick in oil prices. Oil prices continued to move north on Monday after Saudi Arabia’s oil minister Khalid Al-Falih hinted that a possible extension of cuts in crude production by major oil producers including Russia.

The index declined 0.2% on Tuesday after North Korea’s ambassador to the UK said the country will proceed with its sixth nuclear test. Choe Il went a step ahead by threatening to destroy U.S. strategic assets in case U.S. makes any provocations. Additionally, drop in oil prices adversely affected energy shares.

The index again lost 0.2% on Wednesday following the abrupt dismissal of FBI Director James Comey by President Trump. Investors remained worried that such a dismissal could delay key items on the Trump administration’s agenda including corporate tax reform, deregulation and infrastructure policies.

Shares of The Walt Disney Company (NYSE:DIS) closed 2.2% lower, owing to its revenue miss in fiscal second-quarter 2017. Shares of The Boeing Company (NYSE:BA) declined 1.3% on Wednesday following the news of halting of 737 MAX flights by the company because of engine issues. Fall in the shares of Walt Disney and Boeing had a negative impact on the benchmark.

The index moved 0.1% lower on Thursday, dragged down by retail stocks which suffered after Macy’s, Inc. (NYSE:M) reported weaker than expected quarterly results. Weak performances from Macy’s and Kohl’s Corp. (NYSE:KSS) had a negative impact on investors’ sentiment, which ultimately had an adverse impact on the broader market.

Components Moving the Index

Disney posted better-than-expected earnings for the second straight quarter, as the company reported second-quarter fiscal 2017 results. The company’s earnings in the reported quarter came in at $1.50 per share, beating the Zacks Consensus Estimate of $1.45 and also increased 10% driven by robust performance of Studios as well as Parks and Resorts businesses. The stock has a Zacks Rank #3 (Hold).

Meanwhile, revenues also increased 3% year over year to $13,336 million but missed the Zacks Consensus Estimate of $13,478 million. Increase in revenues can primarily be attributed to strong performance of Media Networks and Parks and Resorts.

The Media Networks segment’s revenues gained 3% to $5,946 million, primarily on the back of 3% increase in Cable Networks revenues to $4,062 million. Parks and Resorts revenues came in at $4,299 million, up 9% from the year-ago period. The Studio segment generated revenues of $2,034 million, down 1% year over year. Consumer Products & Interactive Media division experienced an 11% decrease in revenues to $1,057 million. (Read: Disney Tops Q2 Earnings, Sales Lag, ESPN Woes Linger)

Boeing is temporarily suspending test flights of its new models of commercial jetliners 737 Max due to probable problems with a key engine part, according to media sources. The step is intended to focus on the safety of all who use and fly the company’s products.

CFM International – a 50/50 joint venture between General Electric (NYSE:GE) Co. GE and Safran (PA:SAF) of France, and maker of the new engine model – recently reported a potential manufacturing quality flaw in the CFM LEAP 1B engine that powers the new-generation jet. Soon after that, Zacks Rank #3 rated Boeing suspended the flights "out of an abundance of caution" and is currently inspecting along with CFM to find out the root of the problem. (Read: Boeing Suspends 737 Max Jetliners on Engine Issues)

3M Company’s (NYSE:MMM) Traffic Safety and Security Division recently entered into an agreement to divest its tolling and automated license/number plate recognition business to Neology, Inc.

Headquartered in San Diego, CA, Neology is a leading provider of integrated solutions for tolling, electronic vehicle registration and public safety applications. The company is a subsidiary of SMARTRAC, a portfolio company managed by One Equity Partners, a middle-market private equity firm.

The business held for sale has annual global sales of approximately $40 million. The transaction is expected to close by the third quarter of 2017. On completion of the deal, approximately 85 employees are expected to join Neology. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

JPMorgan Chase & Co. (NYSE:JPM) is planning to relocate around hundreds of banking jobs out of London. This action will lead to the company’s loss of “passporting-rights” from London. The stock has a Zacks Rank #3.

The bank is considering moving staff of its EU custody business to Dublin, its investment banking business to Frankfurt and treasury services to Luxembourg. The bank already has its offices in Dublin and Frankfurt. There has been no decision yet on the number of workers to be shifted.

Per the investment banking head Daniel Pinto, “We have to plan for a scenario where there is no UK-EU passporting deal, and we have to move a substantial portion of our business to continue serving our European clients.” He also added, “We’ll have to wait to see what kind of deal can be achieved and see what we need to do from there." (Read: JPMorgan to Relocate London-Based Jobs to EU Due to Brexit)

DuPont (NYSE:DD) announced that its Advanced Printing business will showcase new product offerings during the China Print tradeshow in Beijing. DuPont Advanced Printing combines leading technologies and products for printing and package printing industries.

In China, DuPont will be highlighting Cyrel Easy ESM and EFM which are developed for paper printing application. While Cyrel Easy ESM and EFM are useful as solvents, Cyrel Fast is a thermal processor.

The products to be featured at the show also includes DuPont Cyrel Fast 2000TD with features like cutting-edge tools and technologies that contribute to higher plate quality, easier workflow, and improved machine serviceability. (Read: DuPont's Advanced Printing to Exhibit New Products in China)

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 lost 0.1%.

Next Week’s Outlook

The Dow continued to move lower over a second successive week, weighed down by a variety of factors. North Korea could possibly cease to be a concern over the next few days but events surrounding the Trump administration are likely to keep investors on tenterhooks.

Allegations of Russian involvement in the President’s election campaign are unlikely to die down in a hurry. At the same time, oil prices could see renewed upside in the days ahead which will eliminate at least one key investor concern. Also, the tone of economic reports particularly that of retail sales, is likely to have a significant impact on market direction in the days ahead.

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