Is the Dow's Rally in Vain?

Warm memories of the hot start to 2012 and much-ballyhooed January effect -- that a strong first month presages a good year -- are fading faster than President Obama's re-election chances. Markets are officially in negative territory for the year as concerns mount over Greece's possible euro exit and a continuing non-recovery here at home.

Congressional gridlock is the true culprit for federal government paralysis, and with a new debt ceiling fight, along with forced spending cuts and increased taxes set to automatically kick in at the end of the year, it appears the only net effect politicians will have on the economic recovery is negative. But hey, we can all be proud about their fiscal responsibility as we sink back into recession – just ask the British, who are currently suffering the same fate thanks to austerity measures.

That said, let's take a closer look at the three major indexes and drill down on a few stocks caught up in the action.

Index

Gain/Loss

Gain/Loss %

Ending Value

Dow Jones Industrial Average (INDEX: ^DJI  )

(26.95)

(0.22%)

12,091.62

Nasdaq

7.33

0.27%

2,754.81

S&P 500

(0.53)

(0.04%)

1,277.51

Source: Yahoo! Finance

All three major indexes were trading lower before having an afternoon rally pare losses. The tech-heavy Nasdaq is holding on to slight gains, but with fears over a global slowdown it isn't surprising that manufacturing names, energy, and certain Wall Street banks are taking it on the chin. The Dow's afternoon rally briefly tipped it into positive territory, but it looks like it was all for nothing as the index slid back into the red. Dow components Caterpillar (NYSE: CAT  ) and General Electric (NYSE: GE  ) are among the index's worst decliners, with declines of 2.6% and 1.8%, respectively. Cat was buoyed by hopes of additional Chinese infrastructure spending before having them dashed last week, and GE recently announced that its beleaguered finance division GE Capital was healthy enough to begin paying dividends to the parent company. 

The energy company suffering the most is Cheniere Energy (AMEX: LNG  ) and its subsidiary Cheniere Energy Partners (AMEX: CQP  ) , down 8% and 12%, respectively, although it has nothing to do with falling oil and gas prices. Founder and CEO Charif Souki sold 230,000 shares -- nearly a fifth of his position. He still owns over a million shares, but the irregular selling has investors wondering about the company's short-term prospects.

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David Williamson owns shares of General Electric, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool has a disclosure policy.
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  • Report this Comment On June 04, 2012, at 4:07 PM, Spanky4578 wrote:

    It seems to me that the congressional Republicans and adherents of the Tea Party may be intentionally scuttling the economy so they can have something to blame on the other side. With children's games, this happens when you have nothing to offer yourself.

    The "conservatives" have only austerity for the country and tax cuts for a few. This is what is happening in Europe now, and has happened in third world countries for centuries.

    When will we learn? And what will we learn? These are perilous times that call for statesmanship, discretion and true leadership, of all of which there is a dearth.

    You know, the real tea party was about freedom from domination. Seems present company has forgotten about that.

    Maybe the survival technique for the investor is to sell short or hold until the current lunacy spends itself.

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