These Stocks Are Leading the Dow Higher

At the half-way point of the trading day the Dow Jones Industrial Average (INDEX: ^DJI  ) was up 61 points (0.60%) to 13,601. The S&P 500 (INDEX: ^GSPC  ) is up nine points (0.63%) to 1,469.

There were six economic releases this morning, which were mixed for stocks. However, they were all overshadowed by yesterday’s Federal Open Market Committee meeting. Investors had expected the Federal Reserve would announce a third quantitative easing, and the Fed delivered.

The Fed acknowledged that "growth in employment has been slow, and the unemployment rate remains elevated." The Fed believes that without further stimulus, the economy might not be strong enough for employment conditions continue to improve and that inflation will remain under its 2% target.

To rectify this situation, the Fed announced it would purchase an additional $40 billion per month of agency mortgage-backed securities. Together with the interest from its already sizable holdings of MBS, the Fed should be able to purchase $85 billion of MBS per month. The Federal Reserve also announced that it expects to extend the exceptionally low levels for the federal-funds rate until mid-2015.

Here are today's economic releases:

 Release

Period

Actual

Previous

Retail sales

August

0.9%

0.6%

Retail Sales ex-autos

August

0.8%

0.8%

Consumer Price Index

August

0.6%

0.0%

Core Consumer Price Index

August

0.2%

0.1%

Industrial production

August

(1.2%)

0.5%

UM Consumer Sentiment Index

September

79.2

74.3

Source: MarketWatch U.S. Economic Calendar.

As you can see above, retail sales grew slowly in August. However, the growth was still better than July's numbers and economists' expectations of 0.8% growth. The Consumer Price Index, a measure of inflation, came in slightly below analysts' expectations of 0.7%. Core CPI, the measure of inflation for those who don't eat or use energy, rose 0.2%, which is in line with economists' expectations. Both inflation numbers remain well below the Fed's target for inflation of 2%. The one weak spot in today's economic releases was industrial production, which fell 1.2%. Economists had expected a much lower fall of 0.3%.

The markets as a whole are up, and a few stocks are leading the way.

Today's Dow leaders
Today's Dow leader is Caterpillar (NYSE: CAT  ) , up 2.71% ($2.46) to $93.14. Caterpillar is a cyclical company, highly dependent on GDP growth for profitability. Yesterday's move by the Fed to boost economic growth is positive for the economy, which is part of the reason why Caterpillar is up today. Further, this morning, Caterpillar's director of investor relations spoke at an investor conference, where he said business in China is improving and margins should meet analyst expectations. Fool analyst Neha Chamaria believes Caterpillar is worth a look; click here to read his take.

Second behind Caterpillar is Alcoa (NYSE: AA  ) , up 2.54% ($0.24) to $9.87. Like Caterpillar, Alcoa is a cyclical company highly dependent on GDP growth for profitability. Alcoa has had a rough few years as the economy has slowed, pushing commodity prices down. Aluminum prices have fallen 30% since April 2011, leaving Alcoa shares in a slump. If China's economy continues to slow, things could get worse for Alcoa. Despite the negatives surrounding Alcoa, Fool analyst Sean Williams still believes the aluminum giant will outperform the market. Click here to read his analysis.

The best approach
Watching the broad market each day is exciting, but investing doesn't have to be gut-wrenching and stressful. If you're in the mood to pick up some solid buys for the long term, The Motley Fool has created a brand-new free report from our expert analysts called "2 Dirt Cheap Stocks With Huge Dividends." It won't be available forever, so click here -- it's free.

Dan Dzombak can be found on his Facebook page. He holds no position in any company mentioned. Click here and like his Facebook page to follow his investing articles. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On September 14, 2012, at 2:02 PM, 1984macman wrote:

    Another market leader today is Apple. It opened its sales for preorders of the new iPhone 5, and sold out in less than an hour. Last year, the iPhone 4s, which went on to set new sales records, took 22 hours to sell out.

    Needless to say, Apple has another hit on its hands.

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