With the holiday season in the rearview mirror, the Dow Jones Industrial Average (DJINDICES: ^DJI) is trading 118 points higher, up 0.72%, just before 3 p.m. Good news for the labor market came in today, as initial claims for state unemployment benefits decreased 42,000 last week for a seasonally adjusted rate of 338,000. Labor markets appear to be improving at the same time consumer confidence is rising, a healthy sign as we near the start of 2014. It's been an excellent year for some of the largest U.S. industrial companies and here's what investors should watch for as we start a new year.
Inside the Dow Jones, Boeing (NYSE: BA) looks to finish 2013 as the composite's best performing stock -- up more than 80% for the year. The company's performance has been surging as it continues to develop innovative airplanes for cash-strapped airlines. It's 787 Dreamliner, 737 MAX, and 777X all offer vastly improved fuel economy and have been selling very well -- contributing greatly to Boeing's massive $415 billion order backlog, which doesn't even include nearly $100 billion in orders for the 777X from November's Dubai Airshow. In addition, Boeing delivered its very first 747-8 with performance-improved engines last week, marking a milestone for its 747 program.
Boeing management was confident enough in the company's bright future to hike its dividend 50%, as well as authorizing $10 billion in share repurchases over the next two to three years. With its airplanes selling extremely well, investors will look at one factor as we head into 2014: the location of 777X production.
In the latest twist to labor negotiations between Boeing and its machinists in Everett, Wash., where the 777 airplane is produced, the union will vote again on Jan. 3 to approve or reject a contract extension. The latest offer would replace workers' pension-style retirement fund with a contribution, or 401(k)- style, program. That isn't the only change, but it's the variable that has conjured the most controversy. If the offer is accepted, Boeing would guarantee 777X production at the Everett plant, making Washington state the winner in a heated nationwide competition to get those jobs.
Settling this situation would remove one of the biggest uncertainties facing Boeing and its investors. After budget overruns, production delays, and multiple other headaches revolving around the 787 Dreamliner, many investors would like to avoid similar problems that could arise if Boeing moves its 777X production outside of Washington state. Look for Boeing management to make its decision and remove the uncertainty, one way or another, early in 2014.
Outside of the Dow Jones and the aviation industry, the world's largest automotive manufacturers are looking to China in 2014.
For the first time in nine years it appears that Volkswagen will outsell General Motors (NYSE: GM) to become the largest foreign car maker in China in 2013. Though, with the companies each delivering more than 3 million vehicles in China this year, both are prospering just fine.
Ford (NYSE: F), which was late to the game in China, is trying its best to catch up and grow sales by increasing its vehicle-launch schedule. The Blue Oval plans to introduce 15 models by mid-decade in China in an effort to double its market share to 6%, which would still be far behind rival General Motors' 14.6%. However, Ford's sales in China this year are set to top Toyota (NYSE: TM).
For perspective why automakers are focusing on China, here are some numbers to chew on. Consider that vehicle sales in the United States are projected to slightly top 15.6 million units this year. That's an improvement over last year's 14.5 million, but drastically trails China's 2012 unit sales of roughly 19 million. Some analysts project that 19 million mark to surge to as high as 30 million by the end of the decade -- a ridiculous amount of growth. In comparison, most anticipate sales in the U.S. to reach roughly 17 million in the same time frame.
The clock is ticking for Ford and GM to grab their fair share of China's growing automotive market -- investors would be wise to keep tabs on market share in China going forward.
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