Hedge Fund Manager Shakes the Dow

Some days the market reminds me of my great aunt, who was always looking for something to worry about. With no significant economic releases on the calendar, traders have grasped onto rumors and relatively innocuous developments to send the Dow Jones Industrial Average (INDEX: ^DJI  ) lower heading into the final hours of trading.

What's moving the Dow
Earlier today, rumors were swirling that Spain was on the verge of requesting a bailout from European authorities. This lifted spirits on Wall Street, as the move would trigger Spanish bond-buying by the European Central Bank and thereby flood the money markets with added liquidity. By this afternoon, however, the rumors had been shot down by reports in the Spanish media that the country's prime minister, Mariano Rajoy, won't request aid this weekend.

Contributing to traders' angst were comments filtering out of the annual Value Investors Conference in New York. During a presentation this morning, hedge fund manager David Einhorn, famous for publically predicting Lehman Brothers' downfall at the same conference in 2007, took aim at Chipotle Mexican Grill (NYSE: CMG  ) . Einhorn said the company faces a "resurgent Taco Bell," owned by Yum! Brands, and that rising food costs, increased labor expenses, and scrutiny of its employment practices could all threaten its bottom line going forward. Following the remarks, shares in the popular burrito chain fell more than 4%.

On a more positive note, Einhorn also spent time praising Cigna and General Motors, calling the former his "favorite HMO" and saying that the latter is "much healthier now." Shares in both companies were up sharply following the remarks. GM's shares climbed more than 3%, and Cigna watched as its shares gained nearly 1%.

Also fueling optimism was an announcement from the Reserve Bank of Australia that it will lower the country's benchmark interest rate by a quarter of a percent. While it's the first time the RBA has decreased rates since June, the move follows a multitude of analogous actions by central bankers around the world. Last month, for instance, virtually all of the world's central banks initiated or supplemented similar stimulus measures. Some have even called the trend a "currency war."

The Dow's winners and losers
The Dow stocks are currently mixed in intraday trading, with approximately one-third in the green for the day with the rest heading lower.

The biggest winner on the day is Microsoft, up 0.58% with only an hour left before markets close. The software giant has recently found itself hampered by concerns that the development of Windows 8 is behind schedule. The concerns were sparked by comments Intel (Nasdaq: INTC  ) CEO Paul Otellini made at a recent company gathering. According to reports of the event, Otellini said the operating system isn't ready -- and won't be, even after its distribution to the general public. However, Otellini went on to note that releasing the operating system now is nevertheless the right move.

The biggest losers of the day are E.I. Du Pont de Nemours (NYSE: DD  ) and Caterpillar (NYSE: CAT  ) , down 1.4% and 0.8%, respectively. Both companies are cyclical operations that sell products around the globe. Consequently, as my colleague Anders Bylund noted, "In both cases, investors worry that European orders may suffer if Spain swallows its national pride and requests a bailout," as the country will presumably be forced to implement strict austerity measures in exchange for the assistance.

Foolish bottom line
The indecision of traders today is just a microcosm of the new normal, where the markets sit poised to erratically climb or fall on the basis of little to no news. It's for this reason that investors would be wise to stick to the strongest and ablest of stocks the market has to offer. A list of three companies meeting this description is contained in our popular free report about American operations set to dominate the world. To download your own copy of this free report, simply click here now.

Fool contributor John Maxfield does not own shares in any of the companies mentioned above. The Motley Fool owns shares of Chipotle Mexican Grill, Intel, and Microsoft. Motley Fool newsletter services have recommended buying shares of General Motors, Intel, and Chipotle Mexican Grill. Motley Fool newsletter services have recommended creating a synthetic covered call position in Microsoft. 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 October 02, 2012, at 5:38 PM, zantor2 wrote:

    MY thoughts on the 'hedge fund managers' 'market makers' 'pundits' is

    to H*ll with them all.

    Most if not all of THEM have NO dog in the fight = they likely don't HOLD real stocks in real brokerage accounts.

    AND they, just like all media talking heads, say whatever in the moment will make them money.

    So I say = stick an electric probe in an orifice where the sun don't shine and then let the talk their stuff.

    CAT is and will continue to be a strong real world corporation but daily THE MARKET PLAYERS jack up the trading on CAT and many other solid companies = ?why ? because they can and they want the attention. Problem is = there are real people out here who are losing when they are just PLAYING around.

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