Dow 30 Stock Roundup: JPM Q2 Impresses, Orders For Boeing & United Technologies

The Dow notched up heavy gains during an eventful week, boosted by multiple factors. Strong job numbers posted on July 8 were the initial catalyst for the week’s gains. The earnings season started on a strong note while the Bank of England promised to introduce monetary stimulus next month, boosting investor sentiment. Strong economic data helped the blue-chip index notch up four successive sessions of gains this week.

Last Week’s Performance

The index surged 1.4% last Friday following a better-than-expected jobs report. The U.S. economy created a total of 287,000 jobs in June. The economy added higher-than-expected new jobs for the first time in the last four months. The unemployment rate was 4.9% in June, which was higher than May’s rate of 4.7%. This was mainly because more than 400,000 Americans re-joined the workforce and the labor force participation rate rose to 62.7%.

Strong rebound in jobs addition had a broad-based positive impact on the markets and helped the materials stock DuPont (NYSE:DD) to gain 2.9%. Industrials also gained and Dow components 3M (NYSE:MMM) , General Electric (NYSE:GE) , Boeing (NYSE:BA) and United Technologies (NYSE:UTX) rose 1.3%, 1.2%, 2.3% and 1.7%, respectively.

Further, June’s encouraging job data also raised speculations about heightened rate hike chances this year, which in turn pushed financial stocks northward. Dow components JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS) rose 2.1% and 2.3%, respectively. Upbeat job report also boosted oil prices earlier in the day. Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) advanced 0.6% and 1.7%, respectively.

The Dow gained 1.1% over last week. Benchmarks closed in positive territory for the week after the FOMC minutes from June meeting showed that most of the Fed policymakers were in favor of keeping rates unchanged. Economic news during the week was mostly favorable. The ISM Services Index posted its best rise in the last seven months, private job data was encouraging, initial claims reached near a three-month low and crude inventories registered a better-than-expected decline.

The Dow This Week

The index moved 0.4% higher on Monday following continuing positive impact of Friday’s encouraging job data on investor sentiment. Moreover, Japan’s Prime Minister Shinzo Abe’s victory in the upper house election on Sunday raised chances of additional stimulus measures. This in turn boosted the domestic markets.

Following the victory, speculation heightened that Abe will now come up with more aggressive economic stimulus measures to boost the nation’s economy. JPMorgan and Goldman Sachs rose 0.7% and 1.2%, respectively, reflecting broader gains in financial stocks. Industrial and tech stocks also gained.

The index increased 0.7% on Tuesday after oil prices rebounded and Alcoa (NYSE:AA) posted better-than-expected earnings. Reduced “Brexit” worries and Abe’s initiative to launch more stimulus measures had a broad-based positive impact on oil prices. Brexit fears lessened following news that Home Secretary, Theresa May, will succeed British Prime Minister David Cameron

Moreover, OPEC projected that new oil demand will be 1.2 million barrels per day (bpd) in 2017, nearly 300,000 bpd more than the average of the last 10 years. Further, non-OPEC crude production is expected to fall by 880,000 bpd in 2016, to 56.03 million barrels, as compared to last year. This in turn further pushed oil prices northward.

The index gained 0.1% on Wednesday following speculations that the Bank of England might cut rates to support Britain’s economy. It was being widely expected that in order to boost Britain’s economic condition following its exit from the EU, Bank of England might reduce interest rates for the first time in seven years. Britain’s central bank was expected to reduce the key interest rate from 0.5% to 0.25%, which in turn had a broad-based positive impact on global and domestic markets.

Safe-haven sectors like utilities and telecom emerged as the biggest gainers. In economic news, economic activity expanded at a modest pace in most districts of the U.S., per the Fed’s Beige Book. All the 12 districts indicated moderate growth in economic activity since the previous Beige Book report.

The index moved up 0.7% on Thursday after JPMorgan reported better-than-expected earnings results and Bank of England hinted at easing monetary policy in August. Gains in the Dow component, JPMorgan, had a positive impact on financial stocks.

Moreover, Bank of England surprised the markets by keeping their rate unchanged at 0.5%. However, Britain’s central banks hinted at the introduction of fresh economic stimulus measures next month. Following a surge in pound, the dollar weakened, which in turn had a positive impact on oil prices.

The index notched a record closing high for the fourth-straight session on Friday banking on upbeat U.S. retail sales data, gaining 0.05%. Sales at retail stores and restaurants advanced 0.6% in June from the prior month to a seasonally adjusted $456.98 billion. Sales were mostly led by a jump of 3.9% in building and supply stores, its largest one-month increase since Apr 2010.

Additionally, industrial output expanded at the fastest monthly rate in 11 months. Industrial output that comprises almost everything including manufacturing, mining, and electric and gas utilities increased 0.6% following a 0.3% decline in May. The Dow gained 2% over last week.

Components Moving the Index

JPMorgan’s second-quarter 2016 earnings of $1.55 per share handily outpaced the Zacks Consensus Estimate of $1.43. Also, the figure reflects a 1% rise from the year-ago period. Notably, the results included a legal benefit of $430 million.

Managed net revenue of $25.2 billion in the quarter was up 3% from the year-ago quarter. Also, it compared favorably with the Zacks Consensus Estimate of $24.06 billion. A 35% surge in fixed income markets revenue and a 5% rise in mortgage banking income led to the improvement in the top line.

However, JPMorgan’s credit quality deteriorated during the quarter. As of Jun 30, 2016, nonperforming assets were $7.8 billion, up 2% from the year-ago period. Net charge-offs increased 17% year over year to $1.2 billion. Further, provision for credit losses increased 50% year over year to $1.4 billion (read: Zacks Investment Research

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Written By: Zacks Investment Research