Why the Dow Is Rebounding Today, but Facebook Isn't

The Dow Jones Industrial Average (INDEX: ^DJI  ) rebounded to stay about flat in early afternoon trading today, after disappointing U.S. economic reports dragged down blue chip stocks in morning trading. The number of Americans applying for jobless benefits rose again for the fourth straight week, worrying investors that the slow economic recovery might be losing steam. A report from the Commerce Department also showed that the economy grew at a slower annual rate of 1.9% in the first quarter. Previous estimates were for 2.2% growth.

European stocks largely closed higher today as Germany's jobless rate declined in May. But make no mistake about it: Europe is far from fixed. Investors continue to worry about a potential Greek eurozone exit and the possibility that Spain could need a bailout as it tries to support its third-largest bank, Bankia.

Caterpillar (NYSE: CAT  ) is by far the biggest loser so far today, down nearly 3%. Rival mining-equipment maker Joy Global (NYSE: JOY  ) reported solid earnings but presented a weak outlook for the remainder of the year. Joy cut its earnings forecast for full-year 2012 by $0.35 per share, and lowered its revenue forecast by $100 million. Investors worried that the weak outlook could extend to Caterpillar, which made a big bet on the mining sector last year with its largest-ever acquisition of mining-equipment maker Bucyrus International.

Wal-Mart (NYSE: WMT  ) is currently the biggest winner on the Dow today, up well over 1% and surging above its previous 52-week high. The stock has been able to shake off concerns over the company's Mexican bribery scandal, and is now one of the better performers on the Dow this year, up 11% year to date.

Finally, Facebook (Nasdaq: FB  ) continued its decline today, dropping around 4% so far to hit a new low. Some believe Facebook's sell-off today is mainly due to reports that the company could be contemplating its making own smartphone, and that Facebook is mulling a possible bid to purchase Opera Software, a Norway-based company that develops web and mobile browsers. Overall, there continue to be serious questions about Facebook's business, chief among them the fact that the Internet advertising-based business model is a difficult one, and the company is thus far unable to monetize its significant mobile traffic.

The big picture
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Brendan Byrnes owns shares of Caterpillar. The Motley Fool owns shares of Facebook and Joy Global. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy.
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