The 1 Company That Drove the Dow's Surge

While Alcoa technically kicked off earnings for the Dow Jones Industrial Average (INDEX: ^DJI  ) more than a week ago, today's earnings from Bank of America (NYSE: BAC  ) , IBM (NYSE: IBM  ) , and American Express (NYSE: AXP  ) today indicate we're now in full swing, with eight of the 30 components having released earnings.

But results couldn't have been more mixed. IBM posted a quarterly revenue shortfall, yet it defied expectations by upping its full-year earnings guidance. This is made even more impressive by the broad softness in tech spending we've seen lately. The company also reported the BRIC nations continue to perform well, especially China. This is music to most investors' ears as concerns about slowing growth in China has loomed over markets in recent weeks.

On the other side of the coin, Bank of America fell hard and closed down almost 5% for the day. The performance would seem to stand in conflict with the down-and-out bank's earnings beat this morning. Investors quickly shed early enthusiasm after realizing that the beat was fueled by reduced mortgage losses and a lack of legal settlement costs while the top line continues to feel pressure from low interest rates and regulation.

American Express had a mixed report, with a top-line miss and a bottom-line beat. Investors placed more emphasis on the miss and drove shares down half a percent in after-hours trading. Though American Express stands out as a beacon of balance-sheet superiority in a finance sector that's weak in the knees, the market has reason to push shares lower. Even despite American Express' recession-resistant target market, retail sales fell for the third month in a row in June, and that's where American Express collects two-thirds of its revenue. In the long run, I remain bullish on the company, but I think the market is reacting with justified caution here despite the earnings beat.

Fortunately for investors, as goes IBM, so goes the Dow. The tech company accounts for a whopping 11% of the index's daily movement, more than entire sectors on some of the other indices, so the company's strong earnings helped drive the Dow up more than 100 points by the end of the day. But that's not all. Given the company's reputation as a technology bellwether, all five of the Dow's tech components rounded out the top five performing positions on the index today, with Intel (Nasdaq: INTC  ) up the most at 3.3%. It was a great day to be a tech investor.

Watching earnings releases like today is certainly fun, but it's no way to invest. It's a fast track toward sinking your portfolio and spirits. Instead, savvy investors know that the real way to make money is by identifying great companies, learning them inside and out, and investing for the long haul.

That's exactly what many Fools did at the beginning of the year with Bank of America, a company whose stock certificates most people would have spat on. But today the company sits atop the Dow as the best-performing company year to date, with a 35% gain.

So after today's drop, many people will tell you why Bank of America is a sell and you should run for the hills, but we'll give you the full picture and tell you why Bank of America could still be a buy today. To learn about the market's most traded stock and learn what the schizophrenic Wall Street analysts won't take the time to learn, I invite you to read our brand-new premium research report. The report has a full year of updates that go with it. Read it today.

Austin Smith owns shares of Intel. The Motley Fool owns shares of Intel, Bank of America, and IBM and has created a bear call spread position in American Express. Motley Fool newsletter services have recommended buying shares of Intel, creating a synthetic long position in IBM, and creating a write covered strangle position in American Express. 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. The Motley Fool has a disclosure policy.


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