Why the Dow Rose Today

The Dow Jones Industrial Average (INDEX: ^DJI  ) finished up today as markets reacted to positive manufacturing data.

Index

Change

Ending Value

Dow Jones Industrial Average +52.45 [0.40%] 13,264.49
S&P 500 (INDEX: ^GSPC  ) +10.57 [0.75%] 1,419.04

The Dow started the day down but quickly reversed course at 10 a.m., when the Institute for Supply Management released its Purchasing Managers' Index, which gauges whether economic activity is expanding or contracting. Any reading above 50 indicates growth, and the higher the number, the faster the rate of change. The PMI's reading was 53.4 for March, one point ahead of February, indicating that the economy is growing at a faster pace than last month. This marks the 32nd consecutive month of manufacturing expansion. Analysts had expected the PMI to be 53.

The market rallied today on the news, finishing with a 0.4% gain. Today's rally can hardly be called a surge, though is interesting to note that 26 of the 30 Dow components rose.

Top winner
Leading the pack was today's top Dow stock, Alcoa  (NYSE: AA  ) , up 1.5% to $10.17. Alcoa has been one of the Dow's most volatile stocks, and weak purchasing managers' surveys in Asia and Europe two weeks ago have been weighing on it. It does have a tendency to be the best- or worst-performing stock depending on which way the market is moving, but it's been on a tear in 2012, rising nearly 18%. In fact, Fool analyst David Lee Smith believes Alcoa's future may be even brighter than you think.

Top loser
Home Depot
(NYSE: HD  ) was today's worst Dow stock, down 0.64% to $49.99. I couldn't find any news in particular pushing down the stock, and the company does haveplenty going for it. A recent Interbrand study concluded that Home Depot is the third most valuable brand in the retail industry, second only to Target and Wal-Mart. It pays a dividend to boot, and two months ago Fool analyst Sean Williams cited Home Depot as one great dividend you can buy right now.

The best approach
If you only checked yesterday's close and today's, you wouldn't have thought there was any change. Watching the broad market each day is exciting, gut-wrenching, and stressful, but investing doesn't have to be. If you're in the mood to pick up a few great companies to buy for the long term, The Motley Fool has created a brand-new free report: "3 Stocks That Will Help You Retire Rich." It features three stocks to help you build a smarter retirement portfolio. Get access to the report and find out the name of these three companies. The report is free but won't be forever, so check it out today.

Dan Dzombak owns shares of holds no other position in any company mentioned. Like his Facebook page to follow his investing articles. The Motley Fool owns shares of Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of Home Depot and Wal-Mart Stores creating a diagonal call position in Wal-Mart Stores. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On April 03, 2012, at 4:11 AM, Yourdeadmeat69 wrote:

    AA is on a tear because ACH (China Aluminum) overstated production fourth quarter last year and was taken to the woodshed by the Red Chinese government, Russia's senior aluminum manufacture is in so much financial difficulty, their CEO quit, and RIO TINTO is looking to add aluminum manufacture in Europe to its stable, just when another layer of cost and overhead ISN'T needed.

    Cars are becoming aluminum and not just at the high end, where weight savings are required for good fuel economy..

    On the other hand, it's easy to see why HD declined, with new housing construction dawdling, folks forgot the existing home component to HD is just as large if not larger--consider HD as on sale.

    This isn't hard.

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