3 Stocks Defending the Dow

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Excellent housing data that had markets up early wasn't enough to save the Dow Jones Industrial Average (INDEX: ^DJI  ) from a 101-point drop after lunch, once comments from a Federal Reserve president doubting the ability of QE3 to "benefit growth or unemployment" got around.

So wait -- because one of the Fed's presidents disagreed with open-ended quantitative easing, we disregarded actual economic data of a housing recovery that should help fuel the overall economy? I know the market is addicted to QE, but today screams of a classic overreaction and a reminder not to get too caught up in the daily movements of the broader market.

On the Dow, it wasn't surprising to see among our top performers three of the four representatives of the health-care sector. Health care is generally seen as defensive -- you generally won't get market-beating returns when times are good, but it will help shield you during troubled days. And the four health-care stocks on the Dow are among the industry's most defensive.

Johnson & Johnson (NYSE: JNJ  ) , which won a patent lawsuit regarding a psoriasis drug, gained 0.5% while fellow Big Pharma member Pfizer (NYSE: PFE  ) added 0.4% to its shares on no news. Finally, the newest component and largest publically traded managed-care company, UnitedHealth Group (NYSE: UNH  ) , also saw a 0.4% increase. With insurance premiums seeing double-digit increases for Medicare enrollees, United will be offering a new low-cost plan that significantly undercuts the current low-cost leader, Humana. United should see enrollment increases as a seniors, surprised by their premium increases, begin to shop around.

However, today's biggest Dow winner was Home Depot, which gained 0.6% on its way to claiming a new 52-week high of $60.58 per share. Housing is making a recovery, and Home Depot is poised to profit. Unfortunately, it doesn't look like this recovery will return us to the go-go "buy and flip" housing days or that underwater homeowners will have a chance to gasp air, although prices have started to rise. Housing inventory is unsustainably low, and homebuilders need to get busy just to keep up with basic demand.

In the face of all this, the 2012 elections loom large. The Fool has you covered with our new special free report, "These Stocks Could Skyrocket After the 2012 Presidential Election," where you'll get ideas for several stocks poised to benefit from each candidate's specific platform. Click here to get your free copy.

David Williamson owns shares of Pfizer and Johnson & Johnson, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of UnitedHealth Group, Home Depot, and Johnson & Johnson, creating a diagonal call position in UnitedHealth Group, and creating a diagonal call position in Johnson & Johnson. 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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Today's Market

updated 1 day ago Sponsored by:
DOW 17,873.22 44.93 0.25%
S&P 500 2,099.06 8.96 0.43%
NASD 4,933.51 31.74 0.65%

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Related Tickers

5/27/2016 4:43 PM
^DJI $17873.22 Up +44.93 +0.25%
JNJ $113.06 Up +0.16 +0.14%
Johnson & Johnson CAPS Rating: *****
PFE $34.61 Up +0.18 +0.52%
Pfizer CAPS Rating: ****
UNH $134.00 Up +1.02 +0.77%
UnitedHealth Group CAPS Rating: *****