Alcoa Leads the Dow Lower

A fiscal-cliff-led rally can only last so long before the players involved have to deliver an actual resolution, and thus far, today's lack of news on the negotiation front has, at least for now, thwarted the market's upward charge. Despite a 3.6% climb in homebuilding permits in November, new-home construction dropped 3%. And even though premarket futures trading pointed to a higher open, the Dow Jones Industrials (DJINDICES: ^DJI  ) was down about 12 points by 10:45 a.m. EST. Broader market measures also fell modestly.

Among the 30 Dow stocks, Alcoa (NYSE: AA  ) traded sharply lower in early trade, falling nearly 3% following news yesterday that bond-rating agency Moody's might cut the aluminum giant's credit rating below its current level of "Baa3." Because Alcoa presently has the lowest possible investment-grade rating, any downgrade would push the company's credit into "junk bond" status, which could bring with it a substantial increase in borrowing costs when currently outstanding debt comes due. That's the last thing the profit-starved company needs, as aluminum prices have plunged and show few signs of a substantial recovery in the near future.

General Electric (NYSE: GE  ) also declined, dropping more than 2%. Speculation continues about GE's possible purchase of aerospace company Avio, which could help the company meet its goal of making itself an industrial-focused giant and increase the efficiency of its existing partnership to build engines for aircraft manufacturer Boeing (NYSE: BA  ) . Bears, however, seem more focused on concerns about weaker revenue growth in 2013, with uncertainties about macroeconomic conditions weighing on the stock.

Finally, Pfizer (NYSE: PFE  ) fell about half a percent on reports that it would cut 600 jobs, or about 20% of its primary-drug sales force, in response to falling sales of Lipitor. The blockbuster drug lost patent protection a year ago, and until new drugs work their way through the pipeline to make up for its lost revenue, the cost-cutting measure makes sense for Pfizer.

Learn more
Alcoa has struggled lately, but it's in a strong position to benefit from an expected long-term recovery in its market. Find out whether Alcoa is a buy by reading The Motley Fool's premium research report on the aluminum giant. For a Foolish investment perspective that comes with a year of free updates, simply click here to get started.

Read/Post Comments (1) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 19, 2012, at 2:30 PM, TMFGalagan wrote:

    I just wanted to clarify: any potential downgrade of Alcoa wouldn't affect interest costs on existing already-issued bonds. Rather, it would only have an effect on interest rates if Alcoa decided to issue new bonds, whether to refinance existing maturing debt or to raise new capital.


    dan (TMF Galagan)

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2161826, ~/Articles/ArticleHandler.aspx, 10/21/2016 11:19:04 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,066.99 -95.36 -0.53%
S&P 500 2,136.85 -4.49 -0.21%
NASD 5,244.92 3.09 0.06%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 11:03 AM
AA $26.94 Up +0.25 +0.94%
Alcoa CAPS Rating: ***
BA $135.68 Down -0.16 -0.12%
Boeing CAPS Rating: ****
GE $28.65 Down -0.42 -1.44%
General Electric CAPS Rating: ****
PFE $32.30 Down -0.24 -0.74%
Pfizer CAPS Rating: ****