These Stocks Are Defying the Dow's Drop

As of 1:15 p.m. EDT, the Dow Jones Industrial Average (INDEX: ^DJI  ) is down 103.5 points (-0.77%) to 13,388. The S&P 500 (INDEX: ^GSPC  ) is down almost nine points (-0.61%) to 1,433.

There were two U.S. economic releases today. However, they are being overshadowed by Alcoa's (NYSE: AA  ) earnings report from last night and yesterday's International Monetary Fund October World Economic Outlook.

Report

Period

Figure

Previous

Wholesale inventories

August

0.5%

0.6%

Job openings

August

3.56 million

3.59 million

Source: MarketWatch U.S. Economic Calendar.

This morning the U.S. Department of Commerce reported that inventories grew 0.5% in August, down slightly from July's 0.6%. The biggest mover was oil inventories, which rose 9.4%. The second report was the Department of Labor's job openings report, which fell from 3.59 million in July to 3.56 million in August. That is still 13% above the year-ago numbers.

Today's big news is Alcoa's earnings. The aluminum manufacturer reported a small profit of $0.03 per share, excluding $175 million ($0.15 per share) in one-time charges. While the headline number of $0.03 was in line with analyst expectations, all the one-time charges were not figured in, and as such, the stock is down 4.76% at the halfway point. Alcoa is the first Dow stock to report earnings for the quarter. Its results tend to set the tone for the rest of the Dow, hence the average's lackluster performance.

Alcoa's poor earnings come on the heels of yesterday's IMF report, which spooked the markets. The report's main message was that "risks for a serious global slowdown are alarmingly high."

The IMF estimates a 17% chance that worldwide growth falls to 2% in 2013, which would mean a "recession" in developed nations. "Recession" is in quotes because of the IMF's definition of a recession. Whereas the standard definition is two consecutive quarters of lower GDP, the IMF's definition is a drop in real per-capita GDP.

The IMF expects the global economy to growth 3.3% this year, down from its July estimate of 3.5% growth. For 2013, the IMF expects global growth of 3.6%, down from its July estimate of 3.9% growth.

It's not all doom and gloom: The IMF actually raised its estimate of U.S. growth from 2.1% to 2.2%. However, the entire IMF set of projections rests on two assumptions: first, that the EU will continue on its path to help its member nations deal with their financial problems, and second, that Congress will gets its act together and make sure the U.S. avoids the fiscal cliff.

The IMF expects much worse economic growth if either or both of these assumptions aren't met. World markets are down but a few stocks are defying the Dow's drop.

Today's Dow leaders
Today's Dow leader is Wal-Mart (NYSE: WMT  ) up 3.2% ($2.37) to $76.51. There are three pieces of news pushing up the retailing giant. First, the company's U.S. head of merchandising said that the back-to-school season was "very strong" for Wal-Mart and that the strength should continue into the holiday season. Second, the company announced it is testing its same-day delivery service in San Francisco and San Jose. Third, Wal-Mart competitor Costco reported better-than-expected fourth-quarter results. Fool analyst Alyce Lomax is bearish on Wal-Mart and recently wrote up why she won't touch the stock.

Second for the day is McDonald's (NYSE: MCD  ) , up 0.88% ($0.82) to $92.93. For the third day in a row, McDonald's is rising as the market falls. There's still no real news pushing McDonald's up. Last month the company raised its quarterly dividend by 10% from $0.70 to $0.77 per quarter for a 3.3% forward yield at today's prices. Fool analyst Russ Krull recently wrote up everything you need to know about McDonald's in an article entitled "McDonald's 101." Click here for his analysis.

The best approach
The rest of the week is full of potentially market-shaking events. 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 owns shares of McDonald's. Motley Fool newsletter services have recommended buying shares of McDonald's.  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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