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The 1 Surprising Number Driving the Dow's Surge

The Dow Jones Industrial Average (INDEX: ^DJI  ) rocketed higher this morning on news that the unemployment rate rose to 8.3%. Wait, what? Rose to 8.3% -- isn't that a bad thing? Well, yes, but remember the market is all about expectations, and today the market is cheering the better-than-expected nonfarm payroll additions, which grew by more than 163,000, well in excess of the 100,000 that had been anticipated.

Here is a quick look at how things are stacking up compared to last month.




Expected Jobs Growth 100,000 100,000
Actual Jobs Growth 64,000 163,000
Unemployment Rate 8.2% 8.3%

Source: Yahoo! Finance.

It's all aboard the party train, with every Dow component up for the day. The most are seeing gains greater than 1%.

But there a few stocks that make the Dow's celebration look like a high school party in mom's basement. MercadoLibre (Nasdaq: MELI  ) soared 24% around midday as Q2 profit topped expectations. Revenue grew 28.1% from a year ago, and total payment volume rose 39.1% from the same quarter last year. These results bolster the company's title of "the eBay of Latin America," the latter which reported similarly impressive results a few weeks ago. I have a strong belief in both of these stocks' long-term future and am a happy shareholder of eBay.

LinkedIn (NYSE: LNKD  ) was up 13% in midday trading on another strong quarter with a top-line beat. While I'm a fan of LinkedIn's subscription-based model and believe it to be superior to many other recently public tech companies, the valuation continues to give me room for pause and seems ripe for a sharp correction.

It isn't all fun and games on the market, though. Both Zipcar (Nasdaq: ZIP  ) and Molycorp (NYSE: MCP  ) have fallen a gut-wrenching 34% and 26%, respectively.

Zipcar is a stock I'd continue to steer clear of. It's got a great story and disruptive potential, but the growth is stalling. Lower-than-expected revenue and a trimming of annual estimates isn't what you want to see out of a company that is supposed to be rewriting the book on personal transportation.

Molycorp had an equally tough time, as higher production costs ate into the bottom line. The company's costs more than doubled from the same quarter last year. Taking a step back from today's results, I see a perfect example of the market's irrationally catching up with it. This company got bid up in a big way in the beginning of 2011 as investors worried about China's chokehold on rare elements and tried to perform a little "no-brainer" market timing. But the reality turned out differently, and shares are now trading 82% off their 52-week high.

At the end of the day, though, this is all market noise. Watching the market swing up and down as you try to pick the "right" time is no way to invest. Instead, investors should buy and hold great stocks for the long run, like The Motley Fool's Top Stock for 2012. It's our chief investment officer's highest-conviction stock for the next year, and it will probably be yours, too, after you read his report by by clicking here now.

Austin Smith owns shares of eBay. The Motley Fool owns shares of LinkedIn, Zipcar, and MercadoLibre. Motley Fool newsletter services have recommended buying shares of Zipcar, LinkedIn, and MercadoLibre. 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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  • Report this Comment On August 03, 2012, at 2:53 PM, Yourdeadmeat69 wrote:

    How could you possibly miss OPEN, the cloud that allows you to make reservations for your favorite restaurant?

    They blew away results and hit +20% today.

    Overlooked and the recovery in progress, wait till the season of dining, coming......

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Today's Market

updated 2 days ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

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Related Tickers

9/23/2016 4:55 PM
^DJI $18261.45 Down -131.01 -0.71%
LNKD $192.79 Up +0.31 +0.16%
LinkedIn CAPS Rating: ***
MCPIQ $0.00 Down +0.00 +0.00%
Molycorp, Inc. CAPS Rating: **
MELI $187.09 Down -4.16 -2.18%
MercadoLibre CAPS Rating: *****
ZIP.DL2 $0.00 Down +0.00 +0.00%
Zipcar CAPS Rating: ****