The Dow (INDEX: ^DJI ) rose slightly today, after Friday’s better-than-expected U.S. jobs report and Germany's endorsement of a plan by the European Central Bank to buy up government bonds.
Since the start of the crisis, the ECB has consistently done the minimum to prevent a full-fledged financial crash. Ultimately, rescuing the Euro is going to require a bold plan that probably includes the ECB or IMF buying up lots of government bonds to help lower borrowing costs for troubled countries like Spain, Italy, and Portugal. Of course, it’s still unclear how far they’re willing to go if push comes to shove.
These three stocks did the best:
Weekly Price Change
|Cisco (Nasdaq: CSCO )
|Boeing (NYSE: BA )
|JPMorgan (NYSE: JPM )
Cisco extended its run after gaining 2.2% yesterday, when analysts at Deutsche Bank and Oppenheimer predicted that Cisco would have a strong earnings report due to solid demand for switching. The tech giant, which recently announced a series of job cuts, had been seeing depressed demand for its products due to the economic downturn and increased competition from players like Juniper. The analyst prediction has the feel of a short-term play; over the medium-term, results could have a lot more to do with how the European economy performs than with anything else. That said, any sign of better sales is a good thing, and the stock remains reasonably priced.
Boeing announced that it will increase prices on its commercial airplanes by 5.5%. Although the company said the increase was due to higher costs, the move could also be another way, besides planned production increases, to take advantage of Boeing’s serious backlog. United recently unveiled its first 787 Dreamliner jet, and Boeing is about to deliver the first of 27 Dreamliners that Air India ordered after negotiation delays pushed the date back. A single jet costs over $200 million. I had a chance to fly on a Lufthansa Dreamliner about a month ago, and it was awesome.
Yesterday, Bank of America (NYSE: BAC ) and, to a lesser extent, JPMorgan, rose on signs that Germany might allow the European Central Bank to buy bonds of some troubled countries. Ultimately, any resolution to Europe’s financial crisis is probably going to have to involve large-scale government bond purchases, in order to drive down borrowing costs for more troubled euro economies to begin to recover. Today, Boston’s Fed President Eric Rosengren argued that the Fed should buy up bonds until employment picks up. Although lower long-term rates would mean narrower interest rate spreads for banks, higher housing, stock, and bond values, as well as improved economic growth, would outweigh the negatives for JPMorgan and Bank of America.
Cisco, Boeing, and JPMorgan beat the market today but, as investors, it’s important for us to remember to keep our eyes on long-term performance. If you’re looking for some ideas, the Fool recently highlighted “The 3 Dow Stocks Dividend Investors Need.” You can get the full scoop on these three Dow dividend dynamos by clicking here.