Dow 30 Stock Roundup: Home Depot Earnings Impress, Merck To Buy Peloton Therapeutics
Zacks Investment Research | May 24, 2019 08:25AM ET
The index suffered a difficult week as investors braced for a protracted U.S.-China trade war. The decision to effectively ban Huawei weighed heavily on tech stocks. However, a temporary reprieve to the Chinese tech major provided some respite to American bourses for a single trading day.
By the end of the week, the writing on the wall was clear and traders and individual investors alike were bracing for a long trade conflict. Analysts were highlighting signs that the trade war was starting to trigger an economic slowdown.
Last Week’s Performance
The index declined 0.4% last Friday, following news that trade-related negotiations between the United States and China have stalled. Investors sold risky assets like equities due to concerns about global economic slowdown.
Last week was a disappointing one for Wall Street. The Dow declined 0.7%, marking its fourth-straight weekly losses. Notably, this was the Dow’s biggest weekly losing streak since May 2016.
Trade-related tensions, which have intensified since the second week of May, escalated further. After the U.S. government hiked the existing tariff rate to 25% from 10% on $200 billion Chinese goods, China retaliated by imposing 25% tariff on $60 billion U.S. goods.
Further, President Trump issued an executive order preventing U.S. companies from using information and communications technology equipment from sources which “pose an unacceptable risk to the national security of the United States.” Following the order, the Commerce Department added Chinese telecom behemoth Huawei Technologies to the Bureau of Industry and Security (BIS) Entity List
The Dow This Week
The index lost 0.3% on Monday as blacklisting of the Chinese tech behemoth Huawei by the U.S. government hit technology stocks. Several large U.S. tech giants are cancelling licenses that they had given to Huawei for using high-tech U.S. products.
The index gained 0.8% on Tuesday after the U.S. government provided temporary relief to Huawei Technologies. On May 21, the U.S. government said that it will provide a 90-day reprieve to Huawei before taking tougher trade measures.
During these 90 days, the U.S. government will issue temporary licenses to U.S. suppliers of the Chinese telecom behemoth so that Huawei does not face any immediate supply-chain management issues.
The index lost 0.4% on Wednesday as the trade conflict between the United States and China worsened. On May 22, U.S. Treasury Secretary Steven Mnuchin said the schedule for the next round of trade negotiations with China remains undecided. Further, President Trump said he would not push his infrastructure legislation if Democrats continue to investigate him through several committees.
The index slumped 1.1% on Thursday, suffering a more than 250-point loss as investors braced for a protracted U.S.-China trade war. The IHS Markit index indicated that U.S. manufacturing growth witnessed its slowest pace in a decade in May. This led market watchers to believe that trade tensions are starting to cause an economic slowdown.
Components Moving the Index
The Home Depot, Inc. (NYSE:HD) posted better-than-expected earnings for first-quarter fiscal 2019, retaining its beat streak for five years now. Adjusted earnings of $2.27 per share increased 9.1% from $2.08 in the year-ago quarter. The bottom line also exceeded the Zacks Consensus Estimate of $2.16.
Net sales grew 5.7% to $26,381 million from $24,947 million in the year-ago quarter and surpassed the Zacks Consensus Estimate of $26,298 million. While the company's overall comps increased 2.5%, in the United States, comps grew 3%.
Backed by solid growth strategies as well as present macroeconomic and housing backdrop, Zacks Rank #3 (Hold) Home Depot reaffirmed its sales and earnings view for fiscal 2019, which has 52 weeks.
It expects sales growth of nearly 3.3%, with about a 5% increase in comps (for the comparable 52-week period). Additionally, the company anticipates earnings per share of $10.03 for fiscal 2019, up nearly 3.1% year over year. (Read: Zacks Investment Research
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