Why the Dow Rallied Today

Fresh off a poor showing in October, the Dow Jones Industrial Average (INDEX: ^DJI  ) started November on a positive note, advancing 136 points, or 1.04%, to close at 13,232. Investors applauded economic data released today that was better than anticipated, and markets showed gains from the opening bell forward.

According to payroll processing firm ADP, the U.S. tacked on an extra 158,000 private sector jobs in October, which bodes well for the official employment figures coming tomorrow from the Department of Labor. Previous expectations for private and public sector job gains in the month had been around 120,00. The index gauging consumer sentiment also rallied, to 72.2, its highest level in more than four and a half year.

In response to the bullish news, only three of the Dow's 30 components fell on the day. Wal-Mart Stores (NYSE: WMT  ) lost the most of the three, shedding more than 2%. The stumble could be due to the fact that rival Amazon.com (Nasdaq: AMZN  ) decided to start Black Friday sales an entire month earlier than usual. Fellow retailers Ross Stores (Nasdaq: ROST  ) and Target (NYSE: TGT  ) also reported underwhelming October same-store sales, so its possible that investors expect a similar disappointment from Wal-Mart. 

Starbucks (Nasdaq: SBUX  ) reported quarterly earnings after hours today, and shares rose sharply in subsequent trading. Not only did the coffee maker raise its quarterly dividend by 24%, but it increased its EPS guidance for 2013 from a prior forecast. It now expects EPS to come in between $2.06 and $2.15. 

Bank of America (NYSE: BAC  ) was the biggest winner in the Dow today, popping more than 4.5%. Positive macroeconomic news like we had today may have caused the surge; if the U.S. is indeed in the midst of a secular recovery, banks, in general, should rise with it.

Another company in the index that frequently rises and falls on the basis of macroeconomic indicators is machinery giant Caterpillar (NYSE: CAT  ) . Today was no different, and it was one of the top performers in the Dow, gaining more than 3.3%.

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John Divine owns January 2013 call options on BAC stock. You can follow him on Twitter @divinebizkid, and on Motley Fool CAPS @TMFDivine.

The Motley Fool owns shares of Amazon.com, Bank of America, and Starbucks and has the following options: short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend Amazon.com and Starbucks. 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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