Why Stocks Are Headed for a Lower Close

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Ok, so stocks aren't much lower. At last check, the Dow Jones Industrial Average (INDEX: ^DJI  ) is down by a measly 18 points, or 0.14%. While it's really anybody's guess why stocks are marginally off, here are the three things likely weighing on traders' minds today.

First, consumer spending was down sequentially last month. According to data from the Commerce Department released this morning, personal consumption expenditures decreased by 0.2% in October compared to September. While Hurricane Sandy is being blamed for the decline, as it put many retailers and business out of service for at least a few days in the pivotal Northeast part of the country, economists had nevertheless predicted that the figure would stay even.

Second, politicians in Washington continue their sophomoric and self-interested posturing over our nation's fiscal well-being. In a meeting yesterday, President Obama laid out the initial terms of a plan to avoid careening over the so-called fiscal cliff this coming January. Among other things, it included $1.6 trillion in tax increases over the next decade. In response, House Speaker John Boehner said that the White House needs to "get serious."

And finally, while Europe continues to resemble a train wreck in slow motion, progress was nevertheless made after Germany's parliament voted today to approve an additional tranche of financial support to Greece. Without German support for the bailout, many believed Greece would have been forced into default. To echo the head of the European Central Bank: It's time for Europe's financial leaders to leave the "fairy world." It is indeed.

In terms of individual stocks, Microsoft (Nasdaq: MSFT  ) is the worst performing stock on the Dow today, lower by 1.34% in afternoon trading. The move comes on the heels of some very bad news indeed. According to a report by NPD Research, despite the recent release of its new operating system, Windows 8, sales of personal computers with the preloaded software shrank a staggering 21% between Oct. 21 and Nov. 17 compared to the same time period last year. In addition, Windows 8 tablet sales were "almost nonexistent" over the same time period. As one industry insider put it: "[Demand] for Windows 8 is not that good right now." That definitely takes the cake for most obvious statement of the day.

Two other technology companies following Microsoft lower are Cisco Systems (Nasdaq: CSCO  ) and IBM (NYSE: IBM  ) , down 0.16% and 0.83%, respectively.

On the upside, alternatively, are Wal-Mart (NYSE: WMT  ) and Home Depot (NYSE: HD  ) , higher by 1.33% and 1.17%, respectively. With respect to the former, many retail analysts believe that this holiday shopping period will serve retailers well. For example, the National Retail Federation has predicted that holiday sales will increase by 4.1% this year over 2011. To take advantage of this, Wal-Mart opened its doors on Thanksgiving night, leading to a series of demonstrations by its employees and labor activists.

And with respect to Home Depot, shares in the home improvement retailer are up more than 50% on the year, making it the second-best-performing stock on the Dow after Bank of America (NYSE: BAC  ) . The principal explanation for this is that the housing market is finally in the process of recovering. (In fact, to see why our own Morgan Housel believes that this sector could ignite the next economic boom, click here.) In addition, third-quarter sales at Home Depot were boosted by shoppers preparing for Hurricane Sandy, which ravaged the East Coast at the end of last month.

The Foolish bottom line
While stocks fluctuate on a daily if not hourly basis, investors that know their companies inside and out are bound to outperform those that don't. And it's for this reason that our top analysts have produced in-depth market reports on some of the most popularly traded companies in the market. To read our report on Microsoft, simply click here now.

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10/21/2016 4:00 PM
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