Dow 30 Stock Roundup: Microsoft Rewards Shareholders; GE Wins $1.9B Nuclear Power Contract

The Dow experienced a strong week of gains, buoyed by the Fed’s decision to leave rates unchanged in September. Japan’s central bank’s decision to control the yield curve also provided a flip to stocks. Additionally, gains arising from developments related to major healthcare deals also lifted benchmarks. Economic data was mixed in nature while oil price movement continued to be volatile.

Last Week’s Performance

The Dow decreased 0.5% last Friday following declines in bank stocks on news that Deutsche Bank AG (NYSE:DB) might have to pay a fine of $14 billion to settle a mortgage-backed securities case. Moreover, concerns over crude oversupply weighed on energy stocks, which also had a negative impact on key U.S. indexes.

Additionally, uncertainty remained over the timing of a rate hike ahead of the Fed policy meeting. Meanwhile, the CPI increased 0.2% in August, higher than the consensus estimate of 0.1%.

The Dow gained 0.2% over last week. Apple Inc’s (NASDAQ:AAPL) shares jumped 11.4% for the week, its best rise since October 2011, after the tech-giant experienced strong demand for the new iPhone 7. Meanwhile, rate hike worries continue to inject uncertainty into the markets.

The Dow This Week

The index ended Monday mostly unchanged as investors refrained from making big bets ahead of the two-day policy meetings of the Fed and Bank of Japan (BOJ). Increase in oil prices and strong rise in home-builder confidence had a positive impact on key U.S. indexes. During the weekend, military conflicts in Libya weighed on its crude exports.

Moreover, Venezuelan President Nicolas Maduro said that both OPEC and non-OPEC countries are nearing a deal to control crude production. Both these factors boosted crude prices. According to the National Association of Home Builders and Wells Fargo (NYSE:WFC), builder sentiment touched its highest level since Oct, 2015.

The index increased 0.1% on Tuesday ahead of the two-day policy meetings of the Fed and the BOJ. Inventors eagerly awaited any major policy decisions from the two central banks. Moreover, gains in healthcare stocks offset declines in energy stocks. Tobira Therapeutics, Inc’s (NASDAQ:TBRA) shares jumped 720.9% after Allergan plc (NYSE:AGN) decided to acquire the company for $1.7 billion.

Tobira develops products which are used to treat a common liver disease called nonalcoholic steatohepatitis, or NASH. Following this development, shares of Gilead Sciences Inc. (NASDAQ:GILD) , which also develops drugs to treat NASH, rose 3.5%.

While acquisition news boosted the healthcare sector, crude oversupply concerns weighed on energy stocks. Oil prices closed mixed after Colonial Pipeline said that worries over supply disruptions from Gulf Coast refiners have faded as the gasoline line is expected to restart functioning.

The index gained 0.9% on Wednesday after the Fed kept key interest rates unchanged. The FOMC in its policy statement said that argument for a rate hike “has strengthened,” but the central bank waited for “further evidence of continued progress” before raising rates. Although, the lack of a rate hike in September boosted markets, some of its gains were pared following rising expectations of a rate hike in December.

The BOJ’s surprise move to control the yield curve also had a positive impact on both the global and domestic markets. Further, strong decline in crude inventories boosted oil prices, which in turn led gains for energy stocks.

Fed’s decision to keep interest rates unchanged continued to lead the Dow higher on Thursday and the blue-chip index gained 0.5%. However, Fed Chairwoman Janet Yellen’s comments fueled December rate hike chances even further. Meanwhile, sales of existing homes fell 0.9% in August while the Leading Indicators Index decreased 0.2% in September.

Components Moving the Index

Microsoft Corporation (NASDAQ:MSFT) recently announced that by the end of 2016, it plans to buy back $40 billion worth of shares from the secondary market. The company also raised its dividend payout by 8%.

Although the company hasn’t announced an exact date for these developments, the stock repurchase program represents nearly 9% of Microsoft’s total market capitalization of $442.7 billion. Zacks Rank #3 (Hold) rated Microsoft shares were up almost 1% in after-hour trading on Sep 20. (Read: Pfizer (PFE) Breast Cancer Drug Ibrance Wins CHMP Backing )

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 gained 1.1%.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Next Week’s Outlook

Investors have received much needed respite from the Fed’s decision of not raising rates in September. However, the Fed Chair has strongly indicated that there is a strong possibility that rates will be hiked in December. Meanwhile, domestic economic data, which is the Fed’s compass on the policy count remains mixed if not lackluster. Next week features several major economic releases, including data on consumer confidence, housing, durable orders, personal expenditure and the all important GDP report. The nature of these reports is likely to play a strong role in the movement of markets in the days ahead.

Zacks' Best Investment Ideas for Long-Term Profit

Today you can gain access to long-term trades with double and triple-digit profit potential rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Zacks Investment Research

Written By: Zacks Investment Research