Why the Dow Fought Back Yesterday

Following the previous day's skyrocket-in-flight performance, the nearly flat ending yesterday may seem less than thrilling.

Index

Gain / Loss

Ending Value

Gain / Loss %

Dow Jones Industrial Average (INDEX: ^DJI  ) +21.04 12,418.42 0.17%
S&P +0.24 1,277.30 0.02%
Nasdaq (INDEX: ^INIX  ) -0.36 2,648.36 (0.01%)

Of course, where the markets ended doesn't tell us where they began. The markets quickly dropped lower in early trading, with the Nasdaq trading down as much as 0.8% in the early morning. It was a slow and steady climb that brought all three indices nearer to their market open.

An explanation
The markets seemed to shake off lingering concerns about the eurozone implosion, even as the euro dropped against the dollar. This seems unusual, since not long ago a weakening euro was likely to drag things down on this side of the pond. Jim Paulsen, CIO at Wells Capital Management, thinks it can be considered a "delinking" of our economy to Europe's woes. There is good reason to agree with him. The 50-day correlation between S&P e-mini futures and the euro dropped to 0.22, the lowest level since mid-September. This could be a sign that investors are increasingly confident about the state of the U.S. economy and less concerned (or just exhausted with) the European one.

Ultimately, the rise from the early morning drop was also buoyed by strong retailing data and a report of increased car sales. A trade group for malls reported that sales climbed 5.3% last week.

Bright spots
Just because the day was flat, that doesn't mean there weren't any big winners. Recent market dunce Netflix (Nasdaq: NFLX  ) rewarded shareholders with a more than 11% rise amid news that streaming members watched more than 2 billion hours of TV shows and movies in the fourth quarter of 2011. That's quite a positive from a company that's only seemed to stream bad news lately. There were also rumors that Yahoo! may be an interested buyer.

Shares of Ford (NYSE: F  ) also rose a respectable 1.5% after it was reported that its sales rose 11% in 2011. The company seems to be benefiting from its experience of yore as strong demand for trucks and SUVs was the big story. Standouts were its Explorer and Escape SUVs, as well as the Ranger pickup. The company sold 2.1 million vehicles last year, the first time it has sold more than 2 million vehicles since 2007.

Dark clouds
A few bright spots couldn't hide the dark cloud that officially formed, as The Wall Street Journal reported that Eastman Kodak (NYSE: EK  ) is preparing for a Chapter 11 bankruptcy filing. The news hit the stock in the gut and sent shares plunging some 30%. The company has struggled to sell patents to generate enough cash to stay afloat. Interestingly enough, a bankruptcy may be just the thing its patent sales need.

The consistent winner?
The sector with the biggest consistent gains was the consumer discretionary sector. This could be a good omen for The Motley Fool's Top Stock for 2012. Our favorite pick to lead the charge to riches in 2012 is a broadline retailer in a growing economy. We've dubbed it "the Costco of Latin America" around the office and are giddy with its potential in 2012. We've compiled a special free report for investors to uncover this stock today. The report is free today, but it won't be forever, so check it out while you still can.

Austin Smith owns no shares of the companies mentioned here. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and Netflix and creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.


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