Dow 30 Stock Roundup: Cisco, Home Depot, Wal-Mart Beat, Berkshire Raises Stake In Apple

The Dow increased over last week, buoyed by gains made by energy and material shares. Rising hopes that major oil producing countries would reach an agreement on capping production and favorable data helped oil prices surge over this period. Mixed signals emerged from the Fed over the possible path of rate hikes. While some officials said a rate hike was likely later this year, minutes of the Fed’s last policy meeting indicated that policymakers were divided over policy tightening.

Last Week’s Performance

The index decreased 0.2% on Friday following weak retail sales and disappointing wholesale prices data. Both the Dow and the S&P 500 closed in the red, with the materials sector declining the most after the EU opened an antitrust probe on the Dow Chemical (NYSE:DOW) and DuPont (NYSE:DD) merger.

Weaker-than-expected retail sales numbers dampened investor sentiment. The metric remained unchanged from the prior month at $457.73 billion last month. The consensus had estimated growth of 0.4%. Additionally, wholesale prices dropped 0.4% in July from the prior month, its biggest drop since September 2015. This was also the first drop in four months, with both food and energy prices tanking.

The Dow also gained 0.2% over last week. Rise in oil prices helped benchmarks finish in the green for the week. Saudi Arabia’s Energy Minister Kahlid al-Falih showed willingness to talk with major crude-oil producers to limit oil production, which eventually boosted oil prices. Separately, better-than-expected earnings results from large retailers had a positive impact on the broader markets.

The Dow This Week

The index increased 0.3% on Monday, boosted by gains in energy and material shares. Hopes that the prolonged rout in oil prices will lead to a production freeze helped oil prices to gain on Monday. Russian Energy Minister Alexander Novak said that his country is in consultation with Saudi Arabia and other oil producing countries to achieve stability in the oil market.

As a result, WTI crude ended its highest settlement price since July 15 and Brent crude also moved upward. On the economic front, builders’ morale improved, which raised hopes for higher construction activity. The NAHB/Wells Fargo Housing Market Index increased 2 points to 60 in August from a downwardly revised 58 in July.

The Dow closed in the red on Tuesday, losing 0.5%, following hawkish comments from Fed officials. Both William Dudley and Dennis Lockhart expect that there is a possibility of a rate hike this year. On the economic front, industrial production experienced its biggest gain in 20 months in July.

Housing starts also rose 2.1% in July from June to a seasonally adjusted annual rate of 1,211,000, beating the consensus estimate of 1,175,000. However, Consumer Price Index (CPI) remained unchanged in July, in line with the consensus estimate, indicating that inflation is still tepid.

The index increased 0.1% on Wednesday after the minutes of the Federal Reserve’s July 26–27 policy meeting indicated that policy makers were divided over the need for a rate hike. Some policymakers argued that a rate hike should take place soon as the labor market was nearing full employment. However, others believe factors like weak economic outlook for China and the failing conditions of European banks are concerns.

This in turn lowered speculation over chances of a rate hike in the near term and had a positive impact on debt dependent sectors like utilities. Separately, the U.S. Energy Information Administration (EIA) reported a decrease in crude inventories.

The index gained 0.1% on Thursday, boosted by gains in energy shares. Rally in oil prices helped energy shares gain traction. Oil prices officially entered a bull market; thanks to fall in stockpiles and rising expectations that top oil producers will cap output.

In the meantime, applications for unemployment benefits dropped last week. Additionally, investors kept an eye on the annual meeting of the world’s central bank chiefs to be held in Jackson Hole, Wyoming, next week.

Components Moving the Index

Cisco Systems (NASDAQ:CSCO) reported fourth-quarter fiscal 2016 earnings of 58 cents, exceeding the Zacks Consensus Estimate by 3 cents. The adjusted earnings per share figure exclude one-time items but include stock-based compensation expenses.

Moreover, management took the opportunity to announce a restructuring initiative that would reduce the head count by 5,500 positions or 7% effective first-quarter fiscal 2017.

Revenues increased 5.3% sequentially but declined 1.6% year over year to $12.6 billion, which came in above the Zacks Consensus Estimate of $12.5 billion.

For the first quarter of fiscal 2017, Cisco expects revenues in the range of -1% to 1% on a year-over-year basis. The company expects a non-GAAP tax rate of 22%, yielding non-GAAP earnings per share of 58 cents to 60 cents. The Zacks Consensus Estimate is pegged at 55 cents. (Read: Zacks Investment Research

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Written By: Zacks Investment Research