The Dow experienced another difficult week, weighed down again by disappointing earnings and international concerns. The blue-chip index declined on Monday following a selloff in Chinese markets. Stocks rebounded on Tuesday, following a barrage of positive earnings results.

The Dow ended higher on Wednesday after Fed’s policymakers kept key interest rates unchanged and acknowledged that the economy and job market are strengthening. The blue-chip index dropped marginally on Thursday following positive GDP numbers and mixed corporate earnings results. The Dow has lost nearly 1% during the first four trading days.

Last Week’s Performance

Declines in biotech and commodity related stocks dragged benchmarks down to the red on Friday. The Dow lost 0.9% as global growth concerns had a negative impact on commodity related stocks. In China the Caixin Markit flash general manufacturing PMI dropped to 48.2 in July, a 15-month low. Separately, the Eurozone flash PMI for July came in at 52.2, a 2-month low.

Oil prices also fell on Friday amid global supply glut, concerns about demand in China and increase in oil-drilling rigs in the U.S. Dow components Exxon Mobil Corp. XOM and Chevron Corp. CVX dropped 1.5% and 2.5%, respectively. Investors also grappled with disappointing data on new home sales, which declined 6.8% in June.

The Dow also registered its biggest weekly decline since January, losing 2.9%. Quarterly results from seven of its major components, including Apple AAPL and Microsoft MSFT had a negative impact on the blue-chip index last week. Continuous slump in gold prices resulted in a selloff in mining stocks.

The Dow This Week

The blue-chip index lost 0.7% on Monday following a selloff in Chinese markets. Further decline in commodities also dented markets. The Dow closed about 127 points lower on Monday to hit its lowest level since Feb 2. The Shanghai Composite Index tanked 8.5% to close at 3,725.56, its worst one-day slide since Feb 2007. The Shenzhen Composite also declined 7% to 2,160.09, while the small-cap ChiNext ended 7.4% lower. 

Adding to the list of concerns was Chinese industrial profits that dropped in June after it had gained on an annual basis in the prior two months. Chinese stock market rout along with continued concern about oversupply of oil negatively impacted crude oil prices on Monday. Exxon Mobil and Chevron dropped 0.9% and 1.6%, respectively.

Meanwhile, durable orders rose 3.4% in June, exceeding the consensus estimate of a 3.1% rise. Higher aircraft orders were cited to be the reason behind this increase.

The Dow rebounded on Tuesday, gaining 1.1%. A barrage of positive earnings results helped benchmarks snap a five straight session losing streak to end in the green on Tuesday. Pfizer’s PFE second quarter earnings and revenues came in above estimates. Shares of the drug manufacturer gained 2.9%. However, DuPont’s DD second quarter earnings and revenues fell short of expectations due to weakness in agricultural business and currency headwinds. Shares of DuPont declined 1.5%.

Meanwhile, investors brushed off concerns about a continuing rout in Chinese stock market. The Shanghai Composite Index fell 1.2% to close at 3,617.65. Instead, investors remained focused on the two-day Federal Reserve policy meeting scheduled to end on Wednesday. This is because they were looking for clues on the timing of a rate hike.

Exxon Mobil and Chevron gained 4.1% and 3.7%, respectively. Meanwhile, Consumer Confidence Index dropped to 90.9 in July from 99.8 in June. The consensus estimate had projected a meager drop to 99.7.

Stocks ended higher on Wednesday after Fed’s policymakers kept key interest rates unchanged and acknowledged that the economy and job market are strengthening. However, the door for a September rate hike was kept open. The blue-chip index gained 0.7%

A batch of upbeat quarterly earnings reports and a rebound in Chinese shares also added to the bullish sentiment. A rebound in Chinese shares also lifted investor sentiment. The Shanghai Composite Index gained 3.4% to close at 3,789.16, while the smaller Shenzhen Composite rose 4.1% to 2,198.81.

Meanwhile, energy shares gained the most as oil prices moved north. Pending home sales went down 1.8% in June. The consensus estimate had projected a rise by 1.5%.

The Dow dropped a meager 0.03% on Thursday following positive GDP numbers and mixed corporate earnings results. According to the “advance” estimate, second-quarter GDP increased at an annual rate of 2.3%. However, the figure fell short of the consensus estimate of 2.7% gain. Procter & Gamble’s PG shares dropped 4% due to revenue miss on currency woes.

Real personal consumption expenditure accelerated by 2.9%, following a 1.8% increase in the first quarter. Inflation as measured by PCE price index increased by 2.2% in the second quarter after declining 1.9% in the first quarter. Overall, U.S. economy picked up pace in the second quarter, which eventually raised the possibility of a rate hike as soon as September.

Components Moving the Index

Pfizer Inc. posted second quarter 2015 earnings of 56 cents per share, beating the Zacks Consensus Estimate of 51 cents but declining 3% from the year-ago period.  Revenues, which declined 7% to $11.853 billion, were above the Zacks Consensus Estimate of $11.414 billion.

Pfizer raised the midpoint of its 2015 guidance range for revenues by $500 million and for earnings by 4 cents and now expects 2015 earnings of $2.01 to $2.07 per share on revenues of $45.0 to $46.0 billion. The Zacks Consensus Estimate for earnings and revenues are currently $2.04 per share and $45.8 billion, respectively.

Meanwhile, Pfizer is set to acquire Hospira HSP for a total enterprise value of approximately $17 billion in the second half of 2015.

DuPont logged adjusted earnings of $1.18 per share in the reported quarter versus $1.17 per share registered a year ago. It fell short of the Zacks Consensus Estimate of $1.19. The results include 17 cents per share impact from unfavorable currency swings.

DuPont posted net sales of $8,595 million for the quarter, a roughly 11% year over year decline. Sales also trailed the Zacks Consensus Estimate of $9,283 million.

DuPont now envisions adjusted earnings for 2015 to be roughly $3.10 per share (down from $4.00 per share expected earlier), excluding 80 cents per share of expected full-year earnings from the performance chemicals business. The current Zacks Consensus Estimate for 2015 is $3.50.

The Procter & Gamble Company’s fourth-quarter adjusted earnings of $1 per share beat the Zacks Consensus Estimate of 94 cents by 6.4% and increased 8% from the prior-year period. Excluding currency headwinds of 13 cents, earnings per share increased 22% on the back of pricing gains and productivity savings.

P&G’s net sales declined 9% to $17.79 billion in the fourth quarter. The top line missed the Zacks Consensus Estimate of $18.06 billion by 1.5%. As expected, currency headwinds hurt sales by 9%.

The company continues to expect core earnings per share to be down slightly to up mid-single digits in fiscal 2016, as against fiscal 2015 restated core EPS of $3.77. P&G expects net revenue to decline in low-to-mid single digits range in fiscal 2016, against 5% sales decline in fiscal 2015.

Merck & Co. MRK reported second quarter 2015 earnings of 86 cents per share, surpassing the Zacks Consensus Estimate of 80 cents and increasing 1.2% from the year-ago period.

Revenues for the quarter declined 10.5% to $9.785 billion but were above the Zacks Consensus Estimate of $9.709 billion. While currency movement negatively impacted revenues by 7%, the divestiture of the Consumer Care business and other products impacted revenues by net 7%. This was partially offset by the Cubist acquisition.

Merck narrowed and raised its 2015 earnings guidance to $3.45 and $3.55 per share on revenues of $38.6 billion and $39.8 billion. Earlier at the time of presenting first quarter results, the company had guided towards earnings of $3.35 - $3.48 per share on revenues of $38.3 billion - $39.8 billion.

The Boeing Company BA and Airbus Group SE EADSY is in talks with India-based SpiceJet Limited to sell about 100 new narrow-body aircraft for a contract value of $11 billion, as per media sources. SpiceJet intends to buy Boeing 737 MAX and Airbus A320neo in a deal which is expected to be completed by the end of Mar 2016.

The Goldman Sachs Group, Inc. GS has been charged for misconduct related to its dark pool – SIGMA-X – for the second time. Notably, The Financial Industry Regulatory Authority (“FINRA”) imposed a $1.8-million fine on Goldman Sachs Execution & Clearing, L.P. for reporting violations and supervisory failures.

FINRA alleged that Goldman’s execution and clearing unit failed to transmit complete order-related events to Order Audit Trail System (“OATS”), an automated market surveillance program used by the regulator to identify potential violations of trading rules. Moreover, a large part of the transmitted information was deemed inaccurate.

Tiffany Galvin, a Goldman spokesperson, said, “We self-reported many of the issues to Finra, voluntarily took steps to fix those issues, and provided substantial assistance to the Finra staff conducting the investigation.” However, Goldman’s unit has neither admitted nor denied the charges.

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 lost 1.9%.

Next Week’s Outlook

Investors have endured another difficult week, weighed down by the dual impact of mixed earnings and international headwinds. The state of China’s equity markets has been particularly worrying, following the nosedive experienced by its benchmark on Monday. Commodity stocks have also been weighed down by the dual impact of concerns from China and fluctuating oil prices.

Additionally, while GDP has returned to a growth path, numbers have come in below estimates. However, significantly high consumption levels have provided much cause for cheer. Other data has been mixed in nature, but the Fed’s policy statement is being widely interpreted that a rate hike is forthcoming in September.

As more earnings data is released next week, they will continue to influence stock movement. However, several important economic reports are also expected over the next few days. This includes data on manufacturing, services, personal consumption, factory orders, trade and unemployment. If most of these are positive in nature, they could deliver a much needed boost to stocks in the days ahead.

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