The Dow Slips Again

This past week on the market was marked by one awful trading session and the subsequent three-day rally to gain it back. Although the three major indexes fell short, the general resiliency of the market was impressive. Let's take a closer look at the week that was for the Dow, some of its components, and a few other major news items.

As usual, the Greek debt drama dominated the news. The Mediterranean country finally struck a bond swap deal with its private creditors, which was technically ruled a default but in reality saw those creditors take nearly a 75% haircut after exchanging their current bonds for new issues. Greece still has a long way to go; its economy contracted a horrifying 7.5% last year after declining every year since 2008. One has to wonder whether debt restructuring and more austerity measures can fix the underlying problem.

With that short-term eurozone issue behind it and a continued sense of real recovery here at home, the Dow Jones Industrial Average (INDEX: ^DJI  ) ended up down 55 points, unable to reclaim the 200-plus points it lost on Tuesday and the 13,000 threshold that was forfeited the week prior. Although this marked back-to-back down weeks, the Dow remains up 6% since the start of the year two and a half months ago. It has been a relatively drama-free incline, so a small pullback is generally healthy.

The biggest story of the week was Apple's new iPad debut. Pre-order demand for this product is overwhelming, and its release will directly affect both Dow telecom components and Apple partners AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) . Not only will it mean a rash of new subscribers starting on March 16, when the new iPad becomes available, but it also will use their 4G LTE networks. Combine faster connectivity with a better processor with a vastly improved resolution, all while holding the line on pricing, and Apple's tablet competitors have their work cut out for them.

Another Dow component in the news this week was health-care conglomerate Johnson & Johnson (NYSE: JNJ  ) , which made its weight felt in biotech after announcing that a trial for prostate cancer drug Zytiga was unblinded. Zytiga is already on the market, but this trial is to prove its effectiveness as a first-line treatment, and unblinding it -- giving the drug to the control group receiving a placebo -- indicates that it is working well. Current standard-of-care bearer Dendreon (Nasdaq: DNDN  ) , plummeted more than 16% on the news, before gaining much of that loss back. Dendreon's prostate cancer vaccine Provenge, with its unique manufacturing process and $93,000 price tag, has struggled to find the rapid adoption once expected. A new, less expensive competitor would spell real trouble for the company, but since Provenge and Zytiga work differently, the hope for Dendreon (and cancer patients) is that they can be even more effective when used together.

For the Dow, with the Greek debt deal behind us, all eyes will turn toward domestic data, including retail sales figures at the start of the week and inflation numbers toward the end. If the steady pace of the recovery continues, the market should resume its own steady climb and retake 13,000 this coming week.

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David Williamson owns shares of Dendreon and Johnson & Johnson, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple, Dendreon, and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and Apple, creating a bull call spread position in Apple, and creating a diagonal call position in Johnson & Johnson. 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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  • Report this Comment On March 11, 2012, at 8:08 PM, flat123 wrote:

    you and alphs becoming the same what are you guys smoking or should I ask whos paying you Motley has really lost credibilty among the masses

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