Showing posts with label General Electric. Show all posts
Showing posts with label General Electric. Show all posts

Wednesday, October 30, 2019

Stocks Slip Amid Mixed Earnings, Awaiting FOMC Interest Rate Decision

Stocks took a breather the day after the S&P 500 set a new all-time closing high, slumping slightly on various earnings results that were a mixed bag.

Google parent, Alphabet (GOOG), started the dour mood after the close on Monday by missing EPS estimates by a wide margin. General Motors (GM) was another big name that fell short, reporting $1.20 per share against analyst estimates for $1.31. There were plenty of smaller firms reporting solid or neutral results for the third quarter, but the large caps dominated the news flow.

Drops on the main indices were contained, not unusual following a healthy upsurge. Waiting upon the Federal Reserve's FOMC policy decision announcement Wednesday afternoon (2.00 pm ET), trading was muted but not depressing.

When the market opens Wednesday, earnings reports will already have been released for some other big names, including Yum! Brands (YUM), General Electric (GE), and Sotheby's (BID).

Apple (AAPL), Starbucks (SBUX), and Facebook (FB) report after the close.

In between earnings releases and calls, the Fed will provide most of the excitement on Wednesday.

At the Close, Tuesday, October 29, 2019:
Dow Jones Industrial Average: 27,071.42, -19.30 (-0.07%)
NASDAQ: 8,276.85, -49.13 (-0.59%)
S&P 500: 3,036.89, -2.53 (-0.08%)
NYSE Composite: 13,209.63, +23.20 (+0.18%)

Thursday, June 21, 2018

Dow Losing Streak Reaches Seven Days; Walgreens To Replace GE In Dow Index

No analysis needed to spot the recurring pattern of trading prominent on Wednesday. The Dow suffered its seventh straight losing session while the NASDAQ powered to new highs, mostly on the backs of the beloved tech stocks known as the FAANGs.

In the news, Walgreens Boots Alliance (WBA) is set to replace General Electric (GE) in the Dow Jones Industrial Average, effective prior to the open of trading on June 26. Walgreens is trading for 64.61, down from its all-time high of 86.55, June of 2015.

General Electric, which has been under pressure since near the end of last year, has lost nearly two thirds of its value in the past eight months. Shares have fallen from 31.60 per share in October, 2016, to the current per share price of 12.96. The company has lost over 80 percent of its value since 2000.

General Electric was an original member of the Dow when it was formed by Charles Dow in 1896 and a continuous member since 1907.

Since Walgreens is trading at five times the value of GE, an adjustment will be made to the Dow divisor, lest the index experience a rapid upside explosion due to the change. This is exactly how the Dow works, replacing weaker companies with stronger ones.

The is the 15th change in the structure of the Dow since 2004. Some of the companies formerly a part of the index but since removed in the 21st century include Eastman Kodak, International Paper, AT&T, AIG, Citigroup, Bank of America, General Motors, and Honeywell.

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
6/7/18 25,241.41 +95.02 +825.57
6/8/18 25,316.53 +75.12 +900.69
6/11/18 25,322.31 +5.78 +906.47
6/12/18 25,320.73 -1.58 +904.89
6/13/18 25,201.20 -119.53 +785.36
6/14/18 25,175.31 -25.89 +759.47
6/15/18 25,090.48 -84.83 +674.64
6/18/18 24,987.47 -103.01 +571.63
6/19/18 24,700.21 -287.26 +284.37
6/20/18 24,657.80 -42.41 +241.96

At the Close, Wednesday, June 20, 2018:
Dow Jones Industrial Average: 24,657.80, -42.41 (-0.17%)
NASDAQ: 7,781.51, +55.93 (+0.72%)
S&P 500: 2,767.32, +4.73 (+0.17%)
NYSE Composite: 12,648.74, +9.76 (+0.08%)

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%)

Monday, November 13, 2017

Stocks Stumble Early, Rally for Minor Gains; GE Tumbles, Halves Dividend

Stocks continue to show weakness on a day-to-day basis, with implicit underpinning via central bank purchases, much as was the case today as General Electric (GE) posted horrifying third quarter numbers which cost the stock more than seven percent of its market capitalization [19.02, -1.47 (-7.17%)].

The company cut its annual dividend in half, from $0.24 to $0.12, and announced a broad-based restructuring, shedding up to $20 billion of its core assets.

Jeff Immelt, former CEO and Chairman of the Board, had been under pressure from investors to make changes until his ouster just weeks ago.

There's speculation that General Electric could be bounced from the Dow Jones Industrial Average, a position its held since November 7, 1907, having fallen by as much as 35% in the past year while the overall market has posted strong gains. GE is the oldest continuous member of the blue chip index.

GE's hammering at the open no doubt contributed to the dour mood in the early going, but stocks regained their footing and gradually advanced throughout the somewhat lackluster session.

The Dow closed at a new all-time high last Tuesday, but has been subdued since. With the year of 2017 drawing to a close and many fund managers closing their books (or already having done so), it will be interesting to watch the movement of the major indices over the coming weeks and through the holiday season.

Black Friday is a mere 11 days off. Gobble, gobble.

At the Close, Monday, November 13, 2017:
Dow: 23,439.70, +17.49 (+0.07%)
NASDAQ: 6,757.60, +6.66 (+0.10%)
S&P 500 2,584.84, +2.54 (+0.10%)
NYSE Composite: 12,316.83, -5.78 (-0.05%)

Friday, April 10, 2015

Weekly Recap for W/E April 10, 2015: Economy Weak, Stocks Leap

Stocks and bonds have gotten to a point which indicate there won't be a rate increase to the Federal Reserve's most basic federal funds rate until at least September of this year and quite probably, beyond that.

Dependent upon data flows to determine whether the economy (or more specifically, the stock market and the 1% of the population that owns them) is strong and durable enough to withstand raising rates from the zero-bound to something higher, say, 0.25 percent or, as some have cynically put forth, 0.125 percent.

Data has been daunting to the Fed. Industrial production, durable goods and advance figures on first quarter GDP have all been short of expectations, adding to the pain which last week's March non-farm payroll figures presented. Of course, stocks, which have become the only game in town, loved the weak numbers, because it puts any thought of a rate increase on a semi-permanent hold, meaning free-or-nearly-free money and credit, with which it is an easy task to invest and make money.

So, we have the twisted dynamic of bad news on the economy being nothing but champagne and rose for players of stocks, and that was well reflected in this week's trading, with all the indices heading back toward all-time highs. This followed a brief respite in March, as speculators nervously sold out of equities, thinking that the Fed might increase rates in June.

The NFP data crushed that line of thinking, and sent stocks off like rockets this week, concluding with Friday's nifty rise, sending the Dow back over 18,000 once again and the NASDAQ within shouting distance of the magical 5,000 mark. The final day of trading for the week was bolstered by an announcement from General Electric (GE), stating that the company would sell nearly all of its GE Capital financing unit and real estate holdings (about $23 billion) to Blackstone and Wells-Fargo, two companies, which over the past seven years since the housing bust, have become the nation's new landlords. GE put forward a plan to repurchase some $50 billion worth of its own shares over the next three years.

Timing of the deal isn't very curious at all. GE has been stock in a range for the past fifteen years, and, with interest rates such a challenge by which to make profits, CEO Jeff Imelt and his executive team probably felt it was due time to return to its industrial roots. It does set precedent, however, by selling such a large chunk of real estate and real estate financing assets to companies that are already heavily entrenched in the sector, putting an exclamation point at the end of the boom-gone-bust that is damning to capitalism and competition.

GE's buyback provisions will not be put to scrutiny. Wall Street loves dilution, making shares more valuable to the fewer who hold them. With a market cap of nearly $298 billion, GE had room to maneuver, but the key question remains, by lopping off more than a quarter of its asset base, is the company going to generate better returns?

It's already at nosebleed levels, with a P/E of 19 and an annual divided of 0.92, meaning it will take the plunger who invests in the stock today nearly 31 years to double his/her money on the dividend alone. That's a long time, and, with arduous risk implanted.

Nonetheless, stock junkies loved the deal, boosting shares of GE by nearly 11% on the day and making the Dow the percentage winner among major indices.

For the week the Dow Industrials jumped 294.41 points (1.66%); the S&P added 35.10 (1.70%) and the NASDAQ was the big winner for the week, gaining 109.04 points (2.23%).

On the day:
Dow 18,057.65, +98.92 (0.55%)
S&P 500 2,102.06, +10.88 (0.52%)
NASDAQ 4,995.98, +21.41 (0.43%)

Editor's note: Due to unforeseen circumstances and largely, common sense, Money Daily will soon be converting to a weekly format - with the occasional daily post thrown in on major news developments - to present a more robust and well-reasoned approach to our readers. The daily noise and rigid schedule has made it difficult to offer a cogent, thought-provoking view, which is our purpose. In coming weeks, readers should be advised to seek out the weekly recaps, published on Friday evenings, or, more likely, Saturday afternoons.