Fluctuating energy shares and indications of a rate hike in December led to a mixed week for the Dow. Gains in energy and healthcare stocks helped the Dow post gains on Monday. The blue-chip index moved upward on Tuesday, following strong gains from energy and tech shares.

The Dow closed in the red on Wednesday following indications of a rate hike in December. The index experienced a meager decline on Thursday as investors remained cautious ahead of nonfarm payroll data. The Dow has gained 1.2% during the first four trading days.

Last Week’s Performance

Last Friday, dismal economic data and a slump in financials dragged the Dow into the red. The index lost 0.5% after consumer spending recorded its smallest increase since January due to a slowdown in spending on nondurable goods. Personal consumption expenditure increased 0.1% in September, lower than the 0.4% increase in August.

Additionally, the University of Michigan and Thomson Reuters’ reading of consumer sentiment was at 90 in October, lower than the consensus forecast of an increase to 92.7. Earlier, the preliminary consumer sentiment reading was at 92.1 in October.

The decline in financial stocks also had a negative impact on the broader markets. Meanwhile, investors kept an eye on the third quarter earnings results. Two of the largest oil companies, Exxon Mobil Corp. XOM and Chevron Corp/ CVX, reported mixed quarterly results. Nevertheless, shares of both Exxon Mobil and Chevron advanced 0.6% and 1.1%, respectively.

For the week, the blue-chip index gained 0.1%. Benchmarks ended in the green for the week after the Federal Reserve signaled a rate hike possibility in December. Better-than-expected earnings from Apple Inc. AAPL also played an important role in boosting major indexes.

The Dow jumped 8.6% in October. Indications of further economic stimulus programs in the Eurozone and China helped benchmarks end in positive territory for the month. A jump in healthcare stocks and a strong rebound in energy shares also boosted major benchmarks.

Moreover, encouraging economic data on the domestic front, which include housing starts and existing home sales, had a positive impact on major benchmarks. Among other results, earnings numbers from The Boeing Co. BA and United Technologies Corp. UTX also boosted markets.

The Dow This Week

Gains in energy and healthcare stocks lifted the broader markets as the Dow rose 0.9% on Monday. Investors also remained focused on a slew of deals and quarterly earnings results, brushing off weak manufacturing data.

Oil majors Exxon Mobil and Chevron moved upward, helping energy shares move north. Both these Dow components extended their post-earnings gains, despite the decline in oil prices. Shares of Exxon Mobil and Chevron advanced 3.1% and 4.5%, respectively.

Healthcare stocks gained following news of a potential acquisition of Dyax Corp. DYAX by Shire plc SHPG. Shire declared that it will buy Dyax in an all-cash deal valued at $5.9 billion. While shares of Dyax soared 28.4%, shares of Shire declined 1%.

The ISM manufacturing index declined from September’s 50.2% to 50.1% in October, its lowest level in October since May 2013. Meanwhile, construction gained 0.6% in September. And several high-profile mergers lifted investor sentiment.

The index gained 0.5% on Tuesday, following strong gains from energy and tech shares. Auto sales also boosted investor sentiment, which remained unaffected by some dismal earnings numbers. The second consecutive day of gains helped the Dow stay in the green for the year. At that point the Dow had gained 0.5% for the year.

Exxon Mobil and Chevron increased 1.8% and 3.4%, respectively. The two oil majors were the biggest influence on the Dow. Heavyweights Apple and Microsoft Corp. MSFT gained 1.1% and 1.7%, respectively.

Markets were also aided by Autodata’s bullish report of a gain in the auto sales rate in October to 18.2 million cars from 16.6 million in the year-ago period. The auto sales rate remained above 18 million for two consecutive months; the first such instance since 2000.

The Dow snapped two straight days of gains to end in the red on Wednesday, losing 0.3%. Stocks fell after the Fed Chair Janet Yellen said that a rate hike in December was a “live possibility.” Ultra-low interest rates have aided economic recovery and helped markets to enjoy a Bull Run.

The decline in energy shares also had a negative impact on the broader markets on Wednesday. Increase in U.S. crude inventories, a stronger dollar and plunge in gasoline prices dragged oil prices lower. Additionally, the possibility of weaker demand for oil from OPEC in the next few years also dragged oil prices lower. Dow components Exxon Mobil and Chevron declined 1% and 1.4%, respectively.

Meanwhile, Automatic Data Processing Inc. ADP reported that 182,000 private sector jobs were added last month, while September’s job additions were revised downward to 190,000. Investors are keeping an eye on employment reports to gauge the timing of a rate hike.

The blue-chip index experienced a meager decline of 0.02% on Thursday. Investors refrained from making big bets ahead of Friday’s nonfarm payroll report. Initial claims increased 16,000 to 276,000. The consensus estimate had projected initial claims would remain unchanged at 260,000.

Additionally, the 4-week moving average increased 3,500 from the prior week to 259,250. Also, Atlanta Fed president Dennis Lockhart said that the case for a rate hike will “continue to firm up.”

Meanwhile, a decline in energy shares following a drop in oil prices weighed on the broader markets. Increased crude supply in the U.S. and Europe dragged down prices of oil. Exxon Mobil and Chevron declined 1.4% and 2.3%, respectively.

Components Moving the Index

ExxonMobil posted third-quarter 2015 earnings of $1.01 per share, beating the Zacks Consensus Estimate of 89 cents. However, revenues for the quarter came in at $67.3 billion that missed the Zacks Consensus Estimate of $68 billion. The bottom line decreased from $1.89 in the year-ago quarter. The decline stemmed from an environment of persistently falling commodity prices.

In the reported quarter, the energy behemoth witnessed lower commodity prices in the Upstream business, partially offset by improved Downstream margins. Total revenue in the quarter came in at $67.3 billion, much below $107.1 billion in the year-ago quarter. The top line also missed the Zacks Consensus Estimate of $68.0 billion.

Chevron reported better-than-expected third quarter earnings on improved downstream results that saw refining margins climb on lower input costs. Earnings per share came in at $1.09, well above the Zacks Consensus Estimate of 79 cents.

However, Chevron’s performance deteriorated from the year-ago profit of $2.95 per share amid a plunge in oil prices. The company’s quarterly revenue also fell 37.2% year over year to $34,315 million.

Visa Inc. V posted fourth quarter fiscal 2015 (ended Sep 30) operating earnings per Class A common share of 62 cents, in line with the Zacks Consensus Estimate. The bottom line improved 44% year over year.

Total operating revenue for the reported quarter was $3.6 billion, up 11% year over year and in line with the Zacks Consensus Estimate. On a constant currency basis, revenues grew 13% from the year-ago quarter. Operating expense of $1.3 billion was down 23.2% year over year due to lower litigation provision, partly offset by higher personnel and marketing expense.

The Walt Disney Company’s DIS fourth quarter fiscal 2015 earnings per share of $1.20 rose 34.8% year over year and beat the Zacks Consensus Estimate of $1.17, marking the ninth consecutive quarter of an earnings beat.

In spite of growing 9% year over year, revenues of $13,512 million came in a tad below the Zacks Consensus Estimate of $13,561 million, missing expectations for the second consecutive quarter. The year-over-year increase in revenues was primarily driven by a surge in revenues from Media Networks, Parks and Resorts and Consumer Products.

For fiscal 2015, the company reported earnings per share of $5.15, up 19% from the fiscal 2014 figure of $4.32. The company generated revenues of $52,465 million in comparison to $48,813 million in fiscal 2014. Operating income in fiscal 2015 increased 13% to $14,681 million, whereas net income jumped 12% to $8,382 million.

Boeing received an order for 5 787-9 Dreamliners from Qantas Airways Ltd, worth $1.3 billion at list prices.

The Australian flag carrier is also converting three 787-8 orders from its Jetstar Airways subsidiary into 787-9s. These airplanes are expected to open direct routes to Europe in the next two years.

Meanwhile, Boeing received orders from El Al Israel Airlines Ltd for 9 787s, of which 3 orders are for 787-9s. The order, worth over $2.2 billion, is the largest in the airline's history and maintains its reputation of having an all-Boeing fleet. El Al Israel Airlines is also planning to lease 6 more 787s to move forward with its plan of increasing capacity.

The Goldman Sachs Group, Inc. GS has decreased estimates for potential legal losses by 10% to $5.3 billion from $5.9 billion, as stated in August, in its latest quarterly filing. According to the filing, the decline stems from an increase in legal reserves by $416 million during the quarter.

Notably, the bank has increased its legal reserves by $2.1 billion this year, as compared to the total amount set aside in the past three years. Moreover, legal expenses have decreased return on equity to 8.8% in the first nine months of 2015 as compared to 11% in the comparable period of 2014.

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 1.2%.

Next Week’s Outlook

Fluctuating energy shares and growing indications that the Fed will hike rates in December dominated this week’s proceedings. Broader markets have been guided by the movement of energy shares for some time now and it seems that the trend is likely to continue. Investors’ wariness about a rate hike was clearly displayed by their response to comments made by the Fed Chair.

This is why market watchers reduced activity on Thursday, ahead of employment data to be released on Friday. Investors will now be closely tracking domestic economic reports to gauge whether the Fed will hike rates in December.

Several important economic reports are lined up for release in the days ahead. This includes Friday’s non-farm payroll numbers and initial claims, retail sales and PPI data to be released next week. The nature of these reports and the fate of oil prices are likely to determine the direction of the markets in the days ahead.  

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