Why These 2 Dow Stocks Are Winning

Markets continue their week-long descent a day after the release of minutes from the Federal Reserve's latest meeting. Despite a more bearish stance, especially over unemployment, Ben Bernanke and Co. will not engage in any further stimulus for the time being.

That said, let's see how the three major indexes are faring and take a closer look at why the Dow is winning.

Index

Gain/Loss

Gain/Loss %

Intraday Value

Dow Jones Industrial Average (INDEX: ^DJI  ) (5.11) (0.04%) 12,599.42
Nasdaq (INDEX: ^IXIC  ) (21.03) (0.73%) 2,868.03
S&P 500 (INDEX: ^GSPC  ) (4.45) (0.33%) 1,337.00

Source: Yahoo! Finance as of 2:20 p.m.

The Nasdaq continues to show more weakness than the Dow and S&P 500, but that isn't surprising given the tech sector's 6% plunge this week amid earnings warnings and poor PC sales. The Dow's outperformance comes from a full third of its components showing gains for the day, with two stocks both soaring over 4%.

Procter & Gamble (NYSE: PG  ) jumped 4.2% on news that activist investor William Ackman has taken a significant position in the consumer goods titan. P&G has struggled with high costs and a lack of innovation in recent years, cutting guidance in May and again in June. While a turnaround plan is in place, it will be a year before investors see any tangible results. Given these circumstances, it's little wonder that investors are thrilled at the prospect of Ackman shaking up the board and speeding the turnaround along.

Merck (NYSE: MRK  ) is up 4.5%, hitting four-year highs after stopping a trial early for its experimental weekly osteoarthritis drug odanacatib, because the drug was clearly working. Generally a single successful trial won't move the needle much for any of the big pharma stocks, but osteoporosis is a big market, and Merck desperately needs new blockbusters to replace Singulair's recent patent loss. One Citigroup analyst thinks the stock is headed to $50 over the next year, but even if it doesn't climb 15% from today's price, investors will still enjoy Merck's 4.1% yield while waiting for the FDA to approve the drug next year.

Speaking of dividends, the Dow is loaded with companies with solid dividend payouts and highly sustainable business models built for the long haul. The companies highlighted in The Motley Fool's new special free report, "The 3 Dow Stocks Dividend Investors Need," all have an X factor that makes them stand out from their illustrious Dow peers. Download it now, for free.

David Williamson holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Procter & Gamble. The Motley Fool has a disclosure policy. We Fools may not 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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