Dow 30 Stock Roundup: ExxonMobil Raises $8B Debt, United Technologies JV Secures $2B Contract

The DOW had another mixed week, hampered by losses on dismal economic data. The blue-chip index ended in the green on Monday, despite reports of slowdown in manufacturing activity and consumer spending. The DOW moved lower on Tuesday following a disappointing monthly car sales report and comments from Israel’s Prime Minister.

The blue-chip index again ended in the red on Wednesday after private-sector employment gains declined in February. The DOW snapped a two-day losing streak on Thursday, somewhat boosted by the ECB’s announcement of a trillion-dollar stimulus plan that will kick off on Monday.

Last Week’s Performance

Last Friday, the DOW lost nearly 0.5% as investors weighed positive housing and consumer confidence data against slowdown in the U.S. economic growth. Fourth-quarter GDP increased at an annual rate of 2.2%, less than the “advance” estimate of a rise by 2.6%. However, this rise in fourth quarter GDP was more than the consensus estimate of an increase by 2%. Additionally, Chicago PMI numbers touched its lowest level since Jul 2009.

Meanwhile, the Pending Home Sales Index went up 1.7% to 104.2 in January, its highest level since Aug 2013. Separately, the University of Michigan and Thomson Reuters’ final reading of consumer sentiment was at 95.4 in January. This was more than the consensus forecast of an increase to 93.8.

Over the week, the blue-chip index dropped a meager 0.04%. Benchmarks ended mostly in negative territory for the week after decline in oil prices affected energy shares. A drop in consumer price index and increase in initial claims also dented investor sentiment.

The DOW gained 5.6% in February, its best monthly gain since Jan 2013. Strong earnings results by retailers and tech companies, firming up of oil prices, and easing concerns in the Eurozone helped benchmarks register solid gains in February.

Additionally, Fed chairwoman Janet Yellen said the central bank will evaluate economic conditions before considering a rate hike. She added the central bank is looking to retain flexibility to make such a decision “on a meeting-by-meeting basis.”

The DOW This Week

Markets ended in the green on Monday, despite reports of slowdown in manufacturing activity and consumer spending. ISM’s February PMI decreased 0.6 percentage points from January’s reading of 53.5% to 52.9%. Personal consumption expenditure decreased 0.2% in January. Additionally, construction spending declined 1.1%.

In contrast, Markit‘s U.S. PMI increased to 55.1 in February, its highest level since Oct 2014. Interest cuts in China helped benchmarks gain on Monday. The People’s Bank of China (PBOC) trimmed its benchmark interest rates by 25 basis points to 5.35%. PBOC cut its interest rates for the second time in three months due to deteriorating economic conditions in China.

The DOW gained almost 0.9% to close at a record high for the fourth time this year, with 26 out of its 30 components ending in the green. While, Visa Inc. (V -Analyst Report) gained the highest among Dow components, IBM Corp. (IBM - Analyst Report) dropped the most. Shares of Visa went up 2.6%, while shares of IBM declined 0.9%.

The blue-chip index lost almost 0.5% on Tuesday. Dismal monthly car sales report dragged benchmarks down from their record highs in light volume trade. Though six of the seven top auto manufacturers reported year-to-year sales increases in February, they were all behind market expectations.

Total US sales increased 5.3% in February to 1,257,619 vehicles, according to Autodata. This was short of expectations of a 7.1% increase. Meanwhile, industry annualized sales rate was 16.23 million vehicles in February, well short of the 16.7 million estimates.

Also affecting the markets was Israeli Prime Minister Benjamin Netanyahu’s criticism of the White House and Iran’s attempts to reach a nuclear deal. He warned Congress against accepting the deal, which he said is a “countdown to a potential nuclear nightmare'' by a country which “will always be an enemy of America.”

Stocks ended in the red for the second consecutive day on Wednesday, handing the DOW its worst closing level since Feb 19. The blue-chip index lost 0.6%. Private-sector employment gains in February were lower than prior month while ISM services index showed modest improvement.

A total of 212,000 private jobs were added in February, reported Automatic Data Processing, Inc. (ADP - Analyst Report). This was lower than the 250,000 job additions in January. February’s job gains were also at the slowest pace since Aug 2014, according to ADP and Moody's Analytics. The numbers were short of market expectations too, as economists were eyeing an addition of 218,000 – 220,000 jobs.

Separately, ISM services index came in 0.2 percentage point higher than January’s reading to 56.9% in February. The 61st consecutive month of improved activity in the non-manufacturing sector (as reading stayed above 50) hinted at the gradual economic recovery in the U.S.

The DOW snapped a two-day losing streak on Thursday, somewhat boosted by the ECB’s announcement of a trillion-dollar stimulus plan that will kick off on Monday. As announced in January, ECB will buy government bonds worth 60 billion euros a month through a quantitative easing program.

The QE program will continue til Sep 2016. ECB President Mario Draghi said the ECB would purchase these bonds even if they have a negative yield. However, the negative yield should not cross -0.2%, as they need to be within the range of ECB’s deposit rate.

Higher-than-expected initial claims numbers had offset some gains on Thursday. Initial claims for the week ending Feb 28 came in at 320,000, up 7000 from prior week's unrevised level of 313,000. Additionally, new orders for manufactured goods in January dropped for the sixth consecutive month. Despite these headwinds, the blue-chip index gained 0.2%

Components Moving the Index

United Technologies Corp.’s (UTX - Analyst Report) subsidiary Sikorsky Aircraft Corp Maritime and Lockheed Martin Corp.’s (LMT - Analyst Report) joint venture (“JV”) Helicopter Support Co. (“MHSCo”), has been awarded a $2 billion contract by the U.S. Navy for the support of the H-60 aircraft.

The fixed-price, performance-based logistics contract requires 1710 assemblies and parts to service the H-60 aircraft. Moreover, the JV will provide services including repair, modification, overhaul and replacement of hardware in addition to manufacturing of new material for the aircraft. The contract work is expected to be over by Jan 31, 2020.

JPMorgan Chase & Co. (JPM - Analyst Report) announced the redemption of trust preferred securities (TruPS) worth $1.5 billion. The securities to be fully redeemed include 6.70% Capital Securities, Series CC. The redemption is scheduled to take place on Apr 2, 2015.

The redemption will be in accordance with the voluntary redemption provisions present in the documents relating to the TruPS. Further, JPMorgan has fixed the price of redemption of securities at 100% of the liquidation amount.

The company will pay this redemption price along with the distribution outstanding and due on the securities up to the date of redemption to its shareholders. JPMorgan further added that it will utilize the existing available cash to fund these redemptions.

IBM Corp. will buy startup company AlchemyAPI, a machine-learning systems company, in order to boost its Watson technology.

The software, which learns as it goes and gets smarter the more it works, allows users to arrange disparate information together on a certain topic or event, and find similar articles or information sources. It also helps advertisers target online ads better.

ExxonMobil Corp. (XOM - Analyst Report) raised $8 billion of debt in its biggest bond offering since the crude prices started falling last June, according to Bloomberg. The debts were issued through a combination of fixed cum floating rate notes divided into seven parts.

Reportedly, the energy behemoth initially planned to raise $7 billion, but boosted the deal by about 14% to $8 billion. ExxonMobil plans to use the proceeds for general corporate purposes, including acquisitions, capital expenditures and refinancing.

General Electric Company’s GE unit Milestone Aviation Group, a GE Capital Aviation Services company (GECAS), recently announced major expansion plans. These include opening of offices in new international markets while increasing its workforce in the existing strongholds in Europe.

Milestone will be expanding its presence in three new regions – Asia, South America and the Middle East/Africa. While continuing to strengthen its presence in Europe, Milestone will also be opening offices in Singapore; Sao Paulo, Brazil and the United Arab Emirates in this year. 

The Goldman Sachs Group, Inc. GS is set to cut the size of its investment-banking team in Singapore by around 30% compared to the beginning of the year. The news was first reported by Bloomberg, citing people familiar with the matter.

Since the beginning of January this year, around 15 people including three senior officials have been reported to be leaving or have left Goldman’s investment banking unit in Singapore. Weak performance in Southeast Asia and a decline in deal value might have prompted Goldman to reduce the size of the staff in the region.

Verizon Communications Inc. (VZ - Analyst Report), will soon become the first carrier to deploy Swedish telecommunications company Ericsson’s (ERIC - Analyst Report) Radio Dot small cell system in the U.S. Notably, the carrier has installed Ericsson's small cell system at its regional headquarters in Detroit, MI.

The Dot is an innovative solution that will significantly boost the carrier’s indoor mobile network coverage and capacity. Moreover, Verizon will use the small cells to support its HD voice service and video calling over LTE as well.

Verizon's Detroit headquarters will provide a foundation for the assessment of Radio Dot system. The first commercial deployment of Ericsson's Dot had been carried out in Dec 2014, when Vodafone Group plc (VOD - Analyst Report) had rolled it out at Radboud University in Nijmegen.

In addition to the Dot cell rollout, Verizon announced that it has successfully demonstrated the achievability of international Voice over LTE (VoLTE) roaming between different regions of the world with two international telcos – NTT DOCOMO, Inc. (DCM) and KT Corp. (KT - Snapshot Report).

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 remained flat.

Next Week’s Outlook

Oil prices have taken a backseat this week, with economic reports dominating market proceedings for a change. While some indicators such as the ISM services index and pending home sales have been encouraging, others have dampened investor sentiment. Jobs data in particular have negatively impacted markets. Lower private sector job additions and higher initial claims have added to investor concerns.

Meanwhile, the ECB’s stimulus program has provided some encouragement to investors. However, it is likely that domestic economic reports will guide markets going forward. The most keenly awaited among these are today’s nonfarm payroll numbers. Several other crucial reports will follow, including data on retail sales, wholesale and business inventories as well as PPI. If most of these are positive in nature, markets may yet again chalk up steady gains in the days ahead.