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Dow Drops as ExxonMobil Falls Flat; Goldman, JPMorgan Jump on M&A Hopes

By Dan Caplinger - Mar 5, 2014 at 11:00AM

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After two days of volatility, the Dow was little changed today, but there was still action among the stocks in the average.

During the first two days of the week, the Dow Jones Industrials ( ^DJI 1.40% ) were whipsawed by the fast-developing story in Ukraine, with initial aggressive moves by Russia over the weekend causing big stock market losses, followed Tuesday by a more conciliatory tone that sent stocks soaring. Today, though, the Dow is taking a break from the volatility, falling just 27 points as of 11 a.m. EST. Nevertheless, there are still some mixed currents within the blue-chip stocks, with ExxonMobil ( XOM 1.12% ) falling more than 2.5% while financial stocks Goldman Sachs ( GS 2.78% ) and JPMorgan Chase ( JPM 1.50% ) respectively rose about 2% and 1.5%.

ExxonMobil's drop came after it announced capital spending plans for 2014 this morning. Even though the company expects to spend almost $40 billion on capital projects this year, the amount still represents a 6% cut from its record level in 2013. Moreover, despite 10 major new products starting production this year, the company's overall levels of oil and gas production will remain little changed in 2014, again showing the challenges that Exxon and other oil giants have in maintaining production levels from declining legacy assets. Even hopes for better growth rates from 2015 to 2017 weren't enough to make investors more upbeat about Exxon's future.

The current market environment has been kinder to Goldman and JPMorgan. Even as the debt markets started to see turbulence from rising rates, JPMorgan led the annual rankings from Bloomberg Markets among debt underwriters. Moreover, with increasing amounts of merger and acquisition activity, both JPMorgan and Goldman are positioning themselves to take maximum advantage of greater deal volume, hoping to cash in on lucrative fees for advising clients, as well as the resulting underwriting of debt and equity that often proves necessary in M&A deals. With Goldman's success in underwriting the Twitter IPO, the importance of helping other companies in making initial public offerings could also play a key role for it and JPMorgan's investment banking businesses, especially as many investors have bemoaned the lack of good growth-stock opportunities among publicly traded companies.

Investors shouldn't expect this morning's pause to last for long, given how turbulent the Dow has been in 2014. But until the next piece of major news hits, investors should take the break as an opportunity to assess their portfolios and consider how they want to position themselves for the long-term future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$35,719.43 (1.40%) $492.40
The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
$400.11 (2.78%) $10.81
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$162.57 (1.50%) $2.41
Exxon Mobil Corporation Stock Quote
Exxon Mobil Corporation
$62.27 (1.12%) $0.69

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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