Bullish Dow Tamed by Earnings Misses

Even though 23 of 30 Dow Jones Industrial Average (INDEX: ^DJI  ) components were up for the day Wednesday, two huge earnings misses held the index back, and the Dow ended up adding just 5 points to close at 13,557.

The most substantial underperformer was IBM (NYSE: IBM  ) , which dove nearly 5% after a disappointing quarter. Although revenues and EPS both came in higher than last year, the name of the game on Wall Street is expectations, and Big Blue just couldn't keep up. Revenues clocked in more than $0.6 billion below analyst expectations, at $24.75 billion. A strong dollar -- the greenback rallied 13% against the euro during the quarter -- didn't help the company, which has extensive exposure to international markets.

Intel (Nasdaq: INTC  ) was the second-biggest laggard in the index, falling more than 2.5%. While in its case Intel actually beat expectations, its thinning margins, cautious forecast, and rising inventory were enough to spook investors.

Robotic surgical devices maker Intuitive Surgical (Nasdaq: ISRG  ) swung back and forth today, after reporting earnings yesterday along with Intel and IBM. Shares traded higher for much of the day after the company reported a 20% increase in revenues and a 50% spike in earnings. The company makes a patented "da Vinci" line of advanced robotic equipment that can be used in a wide variety of surgical procedures. Though it closed modestly lower today, losing 0.14%, its stock has gone up nearly 40% in the past year because of the success of its technology, and Forbes recently named it the third most innovative company in the world.

Housing data was what really lifted the markets today, as the Commerce Department announced that new housing construction rose unexpectedly by 15% last month, blowing away all prior expectations. The annualized 872,000 rate was nearly 35% higher than the housing starts figure just a year ago.

This positive macro news sent aluminum manufacturer Alcoa (NYSE: AA  ) soaring; shares gained nearly 2.7% for the day. It's typical for broader economic indicators to drive companies like Alcoa, as well as those such as Caterpillar (NYSE: CAT  ) , which was also up nearly 2% on the day. The success of both companies is generally very highly correlated with secular trends in production and the economy.

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John Divine has no positions in the stocks mentioned above. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

The Motley Fool owns shares of IBM, Intel, and Intuitive Surgical. Motley Fool newsletter services recommend Intel and Intuitive Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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