Disney, Microsoft Led the Dow Higher in the Second Quarter

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Disney, Microsoft Led the Dow Higher in the Second Quarter

Today’s the last day of the second quarter. A pair of blue-chip disruptors led the market higher during the period.

Walt Disney (DIS) and Microsoft (MSFT) were the best performers in the Dow Jones Industrial Average since the end of March. DIS surged 25 percent as it unveiled a streaming service that will launch in November.

Disney+ gives the company direct access to its millions of fans without relying on cable-television providers. It’s also priced below Netflix (NFLX), creating a major threat to the company that pioneered the streaming-business model.

Aside from the new service, DIS’s other businesses remained strong. The film Avengers: Endgame had a record opening in April, while better-than-expected amusement-park traffic helped earnings beat forecasts on May 9.

Walt Disney (DIS) chart, with 50-day moving average.
Walt Disney (DIS) chart, with 50-day moving average.

MSFT rose 14 percent by embracing the online, subscription-based revenue model. In this case, cloud-based services like Azure and Office 365 pushed earnings and revenue past consensus. CEO Satya Nadella followed that up by unveiling new products and Windows 10 upgrades in the first half of May.

Laggards in the Quarter

The worst performers in the Dow Jones Industrial Average during the quarter were companies that failed to innovate.

3M (MMM) suffered the biggest drop, down 17 percent, as demand for its mix of old products continued to weaken. It also ran into a wall of slowing orders in China. On April 25, those negatives handed MMM its biggest one-day selloff since 1987.

3M (MMM) chart, with 50-day moving average.
3M (MMM) chart, with 50-day moving average.

Pharmacy giant Walgreen Boots Alliance (WBA) declined 14 on a toxic mix of lower reimbursements, falling comparable sales and a dismal outlook. It all unfolded pretty much as Market Insights anticipated shortly before the quarter began.

Big Movers in the S&P 500

Let’s also take a look at some big movers in the S&P 500 index during the second quarter. Winners:

  • Anadarko Petroleum (APC) had the biggest gain, up 55 percent, after accepting a $38 billion takeover by Occidental Petroleum (OXY). Chevron (CVX) was a failed suitor.
  • Total Systems (TSS): Global Payments (GPM) acquired the credit-card processor for $21.5 billion. TSS rose 35 percent in the second quarter.

Losers:

  • Mylan (MYL): Down 33 percent. Price pressures and a heavy debt load squeezed the generic-drug maker.
  • Gap (GPS), Kohl’s (KSS) and Foot Locker (FL): All fell about 32 percent. The “retail apocalypse” continued for apparel companies as shopping-center traffic remained weak. However, discounters like Wal-Mart Stores (WMT) and Dollar Tree (DLTR) are bucking the trend.

All changes in this post reflect closing prices on Thursday, June 27.

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