This week officially kicked off earnings season, after Alcoa (AA) released its reports following the closing bell on Monday. The earlier part of the week was light on economic data, but there was still no shortage of news. The big takeaway from the release of the Federal Reserve's minutes on Wednesday was that members have begun talking about slowing its quantitative easing, though the program probably won't end until the jobs market meaningfully improves. Thursday's weekly report from the Labor Department showed a decline in jobless claims from two weeks ago, from 388,000 down to 346,000 claims. And Friday's consumer-sentiment number was much lower than expected. Economists were expecting a reading of 78.5 from the Thomson Reuters/University of Michigan data, following March's reading of 78.6, but instead, the index fell to 72.3.
Despite ending the week on negative news, the markets as a whole rose higher this past week. The Dow Jones Industrial Average (^DJI 0.15%) gained 299.81 points, or 2.05%, and now sits at 14,865. The S&P 500 performed slightly better, as it rose 35 points, or 2.29%, while the Nasdaq had the best five days, as it rose 2.84%.
Even though the Dow climbed nearly 300 points this past week, three of its components still managed to end lower.
But before we hit the Dow losers, let's look at the big winner of the week. Pfizer (PFE 1.00%) saw its shares climb by 5.39% over the past five trading sessions, with the bulk of the rise coming on Thursday, after the company announced that its palbociclib drug, which is an experimental treatment for early-stage breast cancer, received breakthrough-therapy designation from the FDA, meaning it will now be expedited through the remainder of the regulatory process. The drug is already in the later stages of official approval and testing, but this title should also help make it a more popular compound among the medical profession.
The big losers
Oil giant ExxonMobil (XOM 0.54%) had a down week, losing 0.02%. On Wednesday, Morgan Stanley downgraded the stock from "equal weight" to "underweight" and reduced the price target from $90 per share to $85. Meanwhile, Morgan Stanley said it sees fellow Dow component Chevron outperforming Exxon by as much as 55% in the coming years and increased Chevron's price target to $135 per share. It's believed that Chevron will have better production growth and constantly improving returns, whereas the outlook for Exxon isn't quite as bright.
The Dow's biggest loser for the second consecutive week is Hewlett-Packard (HPQ -0.83%)., adding a 4.87% loss to its 7.84% drop two weeks ago. H-P's big fall this past week came after IDC reported that personal-computer sales during the first quarter of 2013 had dropped by 13.9%. Most market participants had expected a decline, but it had been estimated that sales would drop only 7.7%, so this report really took many by surprise.
After having an awful 2012, and despite two weeks of massive declines, shares of HP are still up more than 46% year to date, while the Dow itself has risen only 13.44%. With the company in the midst of a turnaround, signs had been pointing in the right direction, but the IDC report really put the brakes on the stock, and now that shares have fallen massively for two consecutive weeks, they may have a way to fall before slowing down.
And the last loser of the week was Alcoa, as shares lost 0.24% of their value. While the company's most recent earnings report, which came out on Monday, wasn't terrible, it was by no means great. Alcoa did manage to beat analysts' estimates on earnings, as net income rose by 58%, and the company earned $0.11 per share, beating estimates of $0.08. But revenue fell by 3% to $5.83 billion and below estimates of $5.91 billion.
While it's always nice to see a beat on the bottom line, with a company like Alcoa, investors really want to see a beat on the top line as well. The company has been hurt over the past year as the price of aluminum continues to fall, putting downward pressure on revenue. And while it's clear that management tightened the belt this past quarter, helping to pull as much money to the bottom as possible, if aluminum prices continue to decline, and revenue suffers, management can cut only so much fat.