ExxonMobil, Johnson & Johnson Tumble as Dow Gains

Instability in the Middle East and volatile oil prices hit energy producers today, with Exxon's stock falling to the bottom of the Dow Jones.

Jun 17, 2014 at 2:30PM
Daily Fool

The market has struggled to stay on course today, and the Dow Jones Industrial Average (DJINDICES:^DJI) beat back earlier losses to rise 35 points into the green as of 2:35 p.m. EDT. Twelve of the blue-chip index's 30 member stocks were in the red. ExxonMobil (NYSE:XOM) has been a particularly tough drag on the Dow so far, falling 1.1% as instability in the Middle East has weighed on energy stocks. Meanwhile, Johnson & Johnson (NYSE:JNJ) shares were down 0.6%. Let's catch up on what you need to know.

Can inflation follow prices?
The broader economic picture started things off on a high note, as new data showed consumer prices jumped by 0.4% in May. While many U.S. consumers are still feeling the pinch from the slow recovery, the gains made in prices are good news for companies that have struggled in the wake of the financial crisis -- and also a positive sign for inflation, which has failed to rise to a sustainable 2% growth level that the Federal Reserve has targeted. Additionally, if inflation continues to increase in the coming months, the upbeat trend could the Federal Reserve to boost interest rates from record lows. Still, the U.S. will need the economy to promote increasing wage growth in the near future as well, especially considering the need for growing consumption in the long-term economic picture.

Exxon Logo

Source: Wikimedia Commons

The international picture is in focus today for the energy sector, particularly for hard-hit ExxonMobil. Investors are keeping a close eye on the ongoing crisis in Iraq, where insurgents push toward the city of Baquba, less than 40 miles from the capital of Baghdad. More than 60% of OPEC oil growth in the coming years is predicted to come from the country in coming years, per The Wall Street Journal. For ExxonMobil and its investors, the turmoil in Iraq, and and growing concerns that violence could spill over to other areas in the region, are a big threat to stable prices and a clear production picture for the future.

Exxon has struggled with production in its recent past. In the last quarter, oil and gas production fell by more than 5% year over year and negatively affected the company's revenue, even as Exxon buoyed its profitability with cost-cutting measures. Fortunately, there is hope on the horizon despite the Middle East trouble: North American energy production has taken off recently, with U.S. output lifting America into the top spot among global oil and gas producers. Exxon alone expects to begin production from 28 new projects by 2017, with major oil sands investments in Canada riding high for the company's future. If the company can make the most out of its North American projects, Exxon can overcome the volatility from the Middle East.

Still, energy investors should keep a watchful eye on developments in the region -- particularly on whether the violence in Iraq and Syria destabilizes the production picture in the region even further.

Elsewhere on the Dow today, Johnson & Johnson has fallen in the wake of Medtronic's (NYSE:MDT) $43 billion purchase of rival medical device maker Covidien. The buy will add significant scale to Medtronic's portfolio and put the company on a better track to compete with Johnson & Johnson in terms of size and -- most importantly -- negotiating leverage with cost-wary hospitals. While Johnson & Johnson and Medtronic focus their core medical device businesses in different areas, with the former's largest niche in orthopedics and the latter's in cardiac devices, Medtronic's purchase of Covidien puts the the buyer in greater contention to challenge J&J's successful surgical products division. While J&J's pharmaceuticals remain its major growth driver for the near future, investors should keep an eye on the emerging battle between these two top medical device producers.

Will this stock be your next multibagger?
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Covidien and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson and Medtronic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers