The Dow's Strength Is Short-Lived

The markets are mixed this morning, thanks to the impaired housing market rearing its head and a drop in consumer confidence. It would have been difficult to replicate yesterday, when Federal Reserve Chairman Ben Bernanke put QE3 back on the table. If anything, today's poor news gives bulls a chance to catch their breath. Let's take a closer look at how the major indexes are doing and some individual stocks making headlines.

Index

Gain / (Loss)

Gain / (Loss) %

Ending Value

Dow Jones Industrial Average (INDEX: ^DJI  ) (9.99) (0.05%) 13,234.48
Nasdaq 5.75 0.18% 3,128.32
S&P 500 0.44 0.19% 1,416.95

Source: Yahoo! Finance as at 10:30 a.m.

The three major indexes all opened up, but poor macro data have driven the Dow into slightly negative territory. The Nasdaq and the S&P 500 are both slightly up, holding on to yesterday's tremendous gains. Speaking of yesterday, the Bernanke comments set the markets ablaze, resulting in gains of 1.2% to 1.8% for the three indexes.

As mentioned earlier, consumer confidence dropped 1.4 points, to 70.2 from last month. Rising gas prices likely affected that, and a report from the Case-Shiller index showing home prices have hit a 10-year low could make matters even worse. Home prices have declined, on average, 34% from the 2006 market peak. Underwater homeowners have been a huge drag on this recovery, and the financials that own these mortgages, like Bank of America (NYSE: BAC  ) and Citigroup (NYSE: C  ) , are stuck with these currently depreciating assets on their balance sheets. Unsurprisingly, both Wall Street titans are down: Citi is witnessing a 0.6% decline, while Bank of America is the worst Dow performer, losing 1.6% so far today.

Staying in the Dow, Pfizer (Nasdaq: PFE  ) is a strong early leader, up a surprising 2.6%, setting a new 52-week high in the process at $22.78 a share. Pfizer has no specific news that would propel the $171 billion company skyward, although investors are waiting on its next big approval date with the FDA, for potential blockbuster Eliquis on June 28, along with a decision over how to divest its animal health and nutrition segments.

However, with health reform taking center stage, it's not surprising that Pfizer is seeing additional action. Opening arguments over the constitutionality of the Affordable Care Act are being heard in the Supreme Court this week. The focus is on the individual mandate, and whether the federal government can require citizens to purchase insurance or face a penalty. The individual mandate gets healthy bodies into the insurance pool, making it profitable for insurers like UnitedHealth (NYSE: UNH  ) to also cover the chronically sick. Neither political party wants the Supreme Court to punt the issue and most court observers expect it will address it. Investors should expect some turbulence in health care, especially with insurers, if that is in fact the case.

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David Williamson owns shares of Pfizer. Click here to see his holdings and a short bio. The Motley Fool owns shares of Bank of America and Citigroup. Motley Fool newsletter services have recommended buying shares of Pfizer and UnitedHealth Group. The Motley Fool has a disclosure policy.

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  • Report this Comment On March 27, 2012, at 12:25 PM, macroanalyst wrote:

    I am not sure and if it really difficult to determine the direction of markets. However, I am encouraged by the fact that the US economy has been strong and some more realistic indicators of the economic activity leads me to believe that things might stay pleasant for relatively longer...http://www.economicsfanatic.com/2012/03/transportation-servi...

    Having said this, one can have good stock markets in a relatively weak economy and weak markets in good economic scenario.

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