Showing posts with label 3M. Show all posts
Showing posts with label 3M. Show all posts

Thursday, June 7, 2018

How the Dow Divisor Helped Industrials Blast Through 25,000

The Dow Jones Industrial Average isn't really an average at all.

If it were, one would take the price of each of the 30 components and divide the sum by 30. That would yield the average price. Since that number would barely move the needle on a day-to-day or minute-by-minute basis, something more was needed to satisfy the voracious appetite of investors. Ergo, the Dow Divisor.

The Dow Divisor is 0.14523396877348. Since it's a fraction of a point, the divisor doesn't actually divide anything. Rather, it's a multiplier, which serves to enhance the gains of the higher-priced stocks and minimize the losses of lower-priced shares. That explains why declines on the Dow are serious events. It's rigged to go higher regardless of volume.

One can clearly see - using such a valuation (weighted) method - why tin-hat theories abound about market manipulation. The Dow leads the market, not only in the US, but around the world. A big move on the Dow triggers the herd instinct to buy other stocks.

Boeing (BA) was the biggest percentage gainer on the day, adding 11.46 points to 371.56. But, thanks to the divisor, Boeing contributed nearly 79 points to the overall Dow gain, despite less than 4.5 million shares changing hands.

By contrast, General Electric was the big loser, dropping 1.16%. But, since GE is the lowest-priced stock on the index, by far, at 13.64, the point loss was a mediocre 0.16. The magic of the divisor meant GE's loss to the overall index was a measly 1.10 points, despite the fact that more than 62 million shares were traded, more than the total number of shares in the three next most-widely traded stocks, Pfizer (PFE), Microsoft (MSFT), and Intel (INTC) combined.

Only four Dow stocks traded lower on the day. In addition to GE, Wal-Mart, Pfizer, and The Travelers finished down, though modestly. Also contributing to the day's massive spike were 3M (MMM), Goldman Sachs (GS), and United Health (UNH), each trading above 200 per share. Their combined advance of 10.77 points were good for another 74 Dow points, despite the fact that they were three of the four least-traded stocks on the exchange (Pfizer was the second least-traded).

So, four low volume stocks were good for 150 points on the Dow. The other 22 gainers were cannon fodder against the bear case as the Dow Industrials outpaced the other indices by a wide margin. The day's gain resulted in the highest closing price on the Dow since March 13.

Happy Dow divisor days!

A couple of good reads on the Dow divisor can be found here and here.

Dow Jones Industrial Average June Scorecard:

Date Close Gain/Loss Cum. G/L
6/1/18 24,635.21 +219.37 +219.37
6/4/18 24,813.69 +178.48 +397.85
6/5/18 24,799.98 -13.71 +384.14
6/6/18 25,146.39 +346.41 +730.55

At the Close, Wednesday, June 6, 2018:
Dow Jones Industrial Average: 25,146.39, +346.41 (+1.40%)
NASDAQ: 7,689.24, +51.38 (+0.67%)
S&P 500: 2,772.35, +23.55 (+0.86%)
NYSE Composite: 12,778.23, +119.53 (+0.94%)

Tuesday, April 24, 2018

Stocks Tumble As Investors Flee Overvalued Stocks

Today was yet another example of the kind of days which are typical in a bear market, and make no mistake, this is the early phase of what could become a raging bear which will strip stocks of 40-60% of their valuations. Stocks were higher in the early trading and slumped in the afternoon, with the Dow Industrials closing at its lowest level in three weeks.

With today's losses, the Dow has plunged into negative territory for the month, following back-to-back declines for February and March. Even earning reports are not enough to keep stocks elevated, especially after Alphabet (parent of Google, GOOG) posted what appeared to be strong numbers only to reveal increasing expenses, crushing profit margins.

Dow component 3M (MMM) led the decline after posting earnings per share of $2.50, which missed analyst estimates of $2.52, and were 16% higher than the $2.16 posted in the year-ago period. The stock was blasted, losing 14.77 points (-6.84%) to end the day at 201.11.

Caterpillar was close behind in the loss column, down -9.80 points (-6.36%).

Alphabet dropped a stunning -47.47 (-4.45%) to close out the session at 1,019.98.

Only six of 30 Dow stocks managed gains on the day. The NASDAQ and other major indices were also badly damaged.

The prevailing trend this earnings season has been that whatever a company posts, it's probably not good enough for anybody seeking to get out of a position, as risk aversion has suddenly become popular once again, especially with yields on the ten-year-note approaching three percent and precious metals (gold, silver) at bargain basement prices.

Dow Jones Industrial Average April Scorecard:

Date Close Gain/Loss Cum. G/L
4/2/18 23,644.19 -458.92 -458.92
4/3/18 24,033.36 +389.17 -69.75
4/4/18 24,264.30 +230.94 +161.19
4/5/18 24,505.22 +240.92 +402.11
4/6/18 23,932.76 -572.46 -170.35
4/9/18 23,979.10 +46.34 -134.01
4/10/18 24,407.86 +428.76 +294.66
4/11/18 24,189.45 -218.55 +76.11
4/12/18 24,483.05 +293.60 +369.71
4/13/18 24,360.14 -122.91 +247.80
4/16/18 24,573.04 +212.90 +460.70
4/17/18 24,786.63 +213.59 +674.29
4/18/18 24,748.07 -38.56 +635.73
4/19/18 24,664.89 -83.18 +552.55
4/20/18 24,462.94 -201.95 +350.60
4/23/18 24,448.69 -14.25 +336.35
4/24/18 24,024.13 -424.56 -88.21

At the Close, Tuesday, April 24, 2018:
Dow Jones Industrial Average: 24,024.13, -424.56 (-1.74%)
NASDAQ: 7,007.35, -121.25 (-1.70%)
S&P 500: 2,634.56, -35.73 (-1.34%)
NYSE Composite: 12,513.91, -96.87 (-0.77%)

Wednesday, October 25, 2017

Dow Soars To New All-Time High, Paced By Caterpillar, 3M

Led by two of its highest-priced components, the Dow Jones Industrial Average blasted to another new high on Tuesday.

Caterpillar (CAT) and 3M (MMM) announced strong third quarter results with the maker of heavy industrial and earth-moving equipment was up nearly five percent, while 3M rose almost six percent on the day.

With those two posting extraordinary gains and the remainder of the Dow 30 rather muted, the blue chip index vastly outpaced the other main indices, putting 24,000 within sight just days after breaking through the 23,000 mark.

The Dow closed above 23,000 for the first time on October 18 and is up nearly 500 points in just one week.

Investors continue to chase returns, and, in the case of Dow components, dividend yield. Both 3M and Caterpillar offer dividend yields rivaling the 10-year treasury bill and are considered by analysts to be among the safest of equities to hold in a portfolio.

The other indices all ended the session with gains, but at much lower percentages than the Dow.

At the Close, Tuesday, October 24, 2017:
Dow: 23,448.20, +174.24 (+0.75%)
NASDAQ: 6,597.09, +10.26 (+0.16%)
S&P 500: 2,567.98, +3.00 (+0.12%)
NYSE Composite: 12,405.13, +20.70 (+0.17%)

Tuesday, October 23, 2012

Stocks Socked Again on Earnings, Revenue Misses

Today's decline had no end-of-day rally from which to save itself. Stocks were down from open to close, and hard, owing mostly to a continuing spate of earnings disappointments and negative guidance outlooks.

Today's main culprits were a trio of Dow components, DuPont (DD), 3M (MMM) and United Technologies (UTX), though DuPont was clearly the worst of the bunch, recording a third quarter profit of just one cent per share, far below analyst estimates of 46 cents per share.

That report, early in the morning, hours before the market opened, sent futures crashing, so that the Dow opened with a triple digit loss in the first minutes of trading. Stocks could not recover, as it is quickly becoming clear that corporate earnings and revenues are lacking - 60% of companies reporting thus far have missed revenue estimates, many of which have been radically lowered. Meanwhile, Europe's woes continue to weight on markets globally, as the bourses across the continent showed heavy losses again.

The race for president also added to investor dismay, the predominant thinking that President Obama clearly outclassed challenger Mitt Romney in Monday night's final debate, focused on foreign policy, an obvious weak spot for the Republican. According to the best guesses on investor sentiment concerning the election, an Obama victory would be bad for stocks, because Obama favors more regulation and higher taxes for high wage earners, while Romney would likely favor policies which generally leave the status quo alone, allowing the abuses of the rich to continue and the wealth gap to widen.

All politics aside, it is actually fundamentals - for a welcome change - that are driving the most recent declines. Companies are reporting an assortment of earnings misses and sour outlooks for the remainder of 2012 and 2013, based almost entirely on current conditions, which have consumers strapped, governments broke and debt levels for all, unsustainable.

Where stocks will go from here is unknown, though all of the major indices have broken below their 50-day moving averages, generally a sign of more bad days to come.

Additionally, the advance-decline line has deteriorated badly over the past week, as has new highs-new lows, finally capitulating, with new 52-week lows outpacing new highs, 129-53

Dow components reporting on Wednesday include AT&T (T) and Boeing (BA), just a pair in a slew of over 400 companies that will be reporting throughout the day. Both of the Dow components report prior to the market open.

The silver lining in the recent declines is the slump in oil and gas prices. Motorists are already seeing 12-15 cent reductions in the price of a gallon of regular gas, with more easing to come, as crude oil is in the midst of a severe mean reversion, which could bring the cost of a gallon of gas to below $3.00 in some areas.

A reduction in the price of gas could be just what the market needs in time for the holidays, critically important to markets and, well, kids.

Dow 13,102.53, -243.36 (1.82%)
NASDAQ 2,990.46, -26.50 (0.88%)
S&P 500 1,413.11, -20.71 (1.44%)
NYSE Composite 8,197.14, -132.05 (1.59%)
NASDAQ Volume 1,780,896,750
NYSE Volume 3,233,623,000
Combined NYSE & NASDAQ Advance - Decline: 1709-3814
Combined NYSE & NASDAQ New highs - New lows: 53-129
WTI crude oil: 86.67, -1.98
Gold: 1,709.40, -16.90
Silver: 31.79, -0.459

Thursday, July 22, 2010

Stocks Explode to Upside on Earnings

Well, apparently whatever it was that Ben Bernanke said on Wednesday to the Senate Committee, spooking the markets into an immediate and swift pullback, was not all that important because prior to the opening bell three Dow components - 3M (MMM), AT&T (T) and Caterpillar (CAT) - released second quarter earnings above expectations and sent stocks off to a roaring start.

The enthusiasm for equities was not in the least tempered by higher initial unemployment claims, which came in at 464,000, well ahead of last week's 427,000. So long as companies were turning sizable profits, nothing was holding back investors from buying.

Even existing home sales being down 5.1% for June or the Index of Leading Indicators dipping 0.2% had no effect on the rush to buy into the good news from corporate earnings.

Dow 10,322.30, +201.77 (1.99%)
NASDAQ 2,245.89, +58.56 (2.68%)
S&P 500 1,093.67, +24.08 (2.25%)
NYSE Composite 6,901.91, +170.75 (2.54%)

Advancing issues reversed Wednesday's drubbing, leading decliners, 5498-1017, and new highs soared ahead of new lows, 278-82. On a day which held such unbridled enthusiasm, there were more new highs (46) on the NASDAQ than new highs (39), reversing a three-day counter-trend. Volume was roughly at the same level as the previous session, though for bulls, it was a positive sign.

NASDAQ Volume 2,264,130,750
NYSE Volume 5,504,649,500

Oil futures were really the big winner on the day, with the September contract rising $2.74, to $79.30, the basis for which was unknown. Gold and silver were ahead only slightly, with gold gaining $3.90, to $1,195.50, and silver up 32 cents, to $18.12.

Every sector showed positive results as earnings season finally produced some results on which traders could trust with their money.

Despite the high quality of earnings, the major indices have yet to break through their 200-day moving averages, which are providing fairly stiff resistance, though corporate earnings continue to defy economic indicators.

At some point, possibly as early as tomorrow, stocks should break out from their recent range, tossing aside the cockeyed government reports and focusing on profits and valuations, like today.

Anecdotally, valuations may be as rich as they may get. For instance, 3M, which reported earnings of $1.54 for the most recent quarter, is trading at a multiple of 16.5 times trailing earnings, fairly rich.

AT&T is trading at 11.5 times earnings, while Caterpillar sports an ultra-rich multiple of 25.75 times earnings.

Traditionally, stocks trade in a range of 12-15 times earnings. Considering the headwinds into which companies are running, the low end of that range may be more appropriate at the present. That kind of metric is keeping a lid on stocks currently.