Dow 30 Stock Roundup: AmEx, Goldman, IBM Earnings Impress; Travelers, Verizon Disappoint

The Dow experienced a volatile week with earnings and oil prices dominating the proceedings. Third quarter results, particularly from banks, have been better than expected. Oil prices continue to have a major impact on proceedings. Stocks declined during two sessions due to adverse reports relating to oil production and inventories. The dollar continued to strengthen following the ECB’s decision to leave rates unchanged.

Last Week’s Performance

The Dow increased 0.2% on Friday following encouraging earnings results from three banking behemoths – JPMorgan Chase (NYSE:JPM) , Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) . Moreover, at a Boston Fed conference, Fed Chairwoman Janet Yellen said that it is better to run a "high-pressure economy" with a tight labor market and strong aggregate demand.

However, poor start to the earnings season, China’s weak trade data and lack of indications from the Fed about rate hike possibilities weighed on investor sentiment for the week. PPI rose 0.3% in September, exceeding the consensus estimate. Business inventories rose by 0.2% in August, while University of Michigan consumer sentiment dropped to 87.9 in October.

The index declined 0.6% over last week Investors remained nervous over weak Chinese trade data. Also, Alcoa Inc.’s (NYSE:AA) shares fell after the company’s earnings and revenue grew less-than-expected. Concerns about Deutsche Bank AG (NYSE:DB) ’s liquidity adversely affected markets, while news about Wells Fargo added to the atmosphere of mistrust. Moreover, Fed policy makers were divided over the timing of a rate hike, which also had a negative impact on investor sentiment.

The Dow This Week

The index decreased 0.3% on Monday after a slump in oil prices weighed on energy stocks. U.S. oil rig count increased from 428 to 432 for the week ended Oct 14, rising for 15 times over the last 16 weeks. Also, reports from the IEA and OPEC showed that OPEC production in September rose by 33.64 million barrels and 33.39 million barrels, respectively.

Consumer discretionary sector also plummeted yesterday following declines in Dow component, McDonald's Corp. (NYSE:C) . Shares of McDonald's fell 1.5% on news that several senior executives will leave the company. McDonald's was the biggest loser among the Dow. However, some of the day’s losses were offset by upbeat earnings results from Bank of America Corp (NYSE:BAC).’s (NYSE:C) .

The index gained 0.4% on Tuesday, powered by upbeat earnings results Better-than-expected earnings results from UnitedHealth Group Inc. (NYSE:UNH) , Netflix, Inc. (NASDAQ:NFLX) , Goldman Sachs Group, Inc. (NYSE:GS) and Johnson & Johnson (NYSE:JNJ) had a positive impact on investor sentiment. Gains in UnitedHealth boosted the healthcare sector.

Meanwhile, pick-up in inflation raised December rate hike chances. CPI increased 0.3% in September, its highest increase in last five months. It was in line with consensus estimate of 0.3% gain. Moreover, CPI rose 1.4% over the past twelve months, its best gain since late 2014.

The index increased 0.2% for the second straight session on Wednesday. A rally in oil prices and encouraging earnings results from Morgan Stanley (NYSE:MS) lifted stocks. The EIA reported that U.S. commercial crude oil inventories fell 5.2 million barrels to 468.7 million for the week ended Oct 14, in contrast to analysts’ projections of an increase of 2 million barrels. Additionally, Saudi Arabia's oil minister Khalid Al-Falih said that non-OPEC nations are also “showing willingness to join” the effort to freeze production.

The index decreased 0.2% on Thursday following slump in oil prices and decline in telecom stocks. Continued crude oversupply concerns and stronger dollar had a negative impact on oil prices, which in turn weighed on energy stocks. Additionally, decline in shares of Verizon Communications Inc. (NYSE:VZ) following its mixed third quarter results pulled telecom stocks downward. Moreover, European Central Bank’s (ECB) decision to keep interest rates unchanged boosted dollar.

Components Moving the Index

American Express Company (NYSE:AXP) reported third-quarter 2016 operating earnings per share (EPS) of $1.24, handily beating the Zacks Consensus Estimate of 96 cents per share. Earnings remained unchanged year over year. Revenues of $7.8 billion were just ahead of the Zacks Consensus Estimate of $7.67 billion but down 5% year over year. American Express has a Zacks Rank #3 (Hold). For 2017, the company expects to earn at least $5.60 on a per share basis. (Read: American Express (AXP) Beats on Q3 Earnings, Guides Up)

Goldman Sachs’ third-quarter 2016 results recorded a positive earnings surprise of 26%. The company reported earnings per share of $4.88, outpacing the Zacks Consensus Estimate of $3.86. Zacks Rank #2 (Buy) Goldman’s net revenue soared 19% year over year to $8.2 billion in the quarter under review. Also, revenues exceeded the Zacks Consensus Estimate of $7.6 billion. (Read: Goldman (GS) Q3 Earnings Soar as Trading Revenues Surge)

International Business Machines Corp (NYSE:IBM) reported third-quarter 2016 results wherein both non-GAAP earnings of $3.29 per share and revenues of $19.23 billion comfortably surpassed the respective Zacks Consensus Estimate of $3.21 and $19.01 billion. For full-year 2016, IBM continues to project non-GAAP earnings to be at least $13.50. The stock has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intel Corp (NASDAQ:INTC)’s (NYSE:C) earnings of 80 cents per share comfortably surpassed the Zacks Consensus Estimate by 7 cents and surged 21.2% from the year-ago quarter. The strong growth was driven by 9.1% year-over-year increase in revenues, which totaled $15.78 billion and was well ahead of the Zacks Consensus Estimate of $15.55 billion. Zacks Rank #2 rated Intel guided to fourth-quarter revenues of around $15.7 billion (+/-$500 million), almost flat sequentially. (Read: Intel (INTC) Beats Q3 Earnings, Q4 Guidance Disappoints)

Johnson & Johnson’s third-quarter 2016 earnings came in at $1.68 per share, beating the Zacks Consensus Estimate of $1.65 per share and increasing 12.8% from the year-ago period. Sales came in at $17.82 billion, beating the Zacks Consensus Estimate of $17.72 billion. Zacks Rank #3 rated Johnson & Johnson raised the lower end of the 2016 earnings guidance. It now expects earnings per share in the range of $6.68 - $6.73 compared with $6.63 - $6.73 expected earlier. (Read: J&J (JNJ) Outshines in Q3 Earnings on Strong Pharma Sales)

JPMorgan’s third-quarter 2016 earnings of $1.58 per share handily surpassed the Zacks Consensus Estimate of $1.40. However, the figure reflects a 6% decline from the year-ago period. Managed net revenue of $25.5 billion in the quarter was up 8% from the year-ago quarter. Also, it compared favorably with the Zacks Consensus Estimate of $24 billion. The stock has a Zacks Rank #2. (Read: JPMorgan Q3 Earnings Easily Top on Solid Trading & Lending)

The Travelers Companies Inc.’s (NYSE:TRV) third-quarter 2016 operating earnings of $2.40 per share beat the Zacks Consensus Estimate of $2.37 by 1.3%. However, the bottom line deteriorated 18.1% year over year. Total revenue of Zacks Rank #3 rated Travelers improved 2.4% from the year-ago quarter to $6.9 billion. Revenues surpassed the Zacks Consensus Estimate of $6.7 billion. (Read: Travelers (TRV) Q3 Earnings and Revenues Beat Estimates)

UnitedHealth reported third-quarter 2016 earnings of $2.17 per share, beating the Zacks Consensus Estimate of $2.08. Earnings improved 23% year over year. Zacks Rank #2 rated UnitedHealth posted revenues of $46.3 billion, outperforming the Zacks Consensus Estimate of $45.9 billion. The top line grew 12% year over year. UnitedHealth raised its 2016 earnings guidance to $8.00 per share from the previous estimate of $7.80 to $7.90. (Read: UnitedHealth (UNH) Beats on Earnings in Q3, Guides Higher)

Verizon adjusted earnings per share came in at $1.01 in the reported quarter, beating the Zacks Consensus Estimate of 99 cents. Quarterly GAAP net income was $3,747 million compared with $4,171 million in the year-ago quarter. Quarterly total revenue decreased 6.7% year over year to $30,937 million. The Zacks Consensus Estimate for the same was pegged at $31,141 million. The stock has a Zacks Rank #3. (Read: Verizon (VZ) Posts Mixed Q3: Earnings Beat, Revenues Lag)

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 0.4%.

Next Week’s Outlook

Encouraging earnings have given stocks a much needed boost over the week. However, oil prices have had the most significant impact on market proceedings. Stocks have risen and fallen in keeping with the fortunes of crude prices. This trend is likely to continue going forward, notwithstanding the nature of upcoming earnings results. Additionally, major economic reports scheduled for next week, such as the all-important GDP report are also likely to have a major impact on the fortunes of markets in the days ahead.

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