Dow Should Have Gone Much Higher

Despite trading down most of the day, and finishing slightly higher at 0.1%, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) should have gone up much more. The index is price-weighted according to its components and, therefore, IBM (NYSE: IBM  ) holds a disproportionate effect over the index, contributing one-sixth of the overall weight. The tech giant fell 8.3% today after missing earnings last night; that alone dropped the Dow by more than 1%. Aside from IBM, however, the index was overwhelmingly positive. Twenty-four of the Dow's 30 stocks finished the day higher, and its peers, the S&P 500 and the Nasdaq, both finished up 0.9% and 1.2%, respectively.

Still, the market seemed bullish after a number of strong earnings reports after hours last night including Google and Microsoft.

The Dow was cooler than the other two indexes on two earnings disappointments this morning from GE (NYSE: GE  ) , and McDonald's (NYSE: MCD  ) .

General Electric shares were off 4.1%, as the conglomerate posted adjusted earnings of $0.35, in line with estimates and up from $0.29 a year ago. Revenue was down slightly, from $35.2 billion, to $35 billion, but still ahead of estimates. However, poor results in its industrial segments shook investors, as the company said that profits in its industrial equipment and services divisions fell 6% and 11%, respectively. Weakness in Europe also weighed on the industrial giant, as revenue from across the Atlantic was down 17%.

Meanwhile, stock of the Golden Arches was off 2%, as same-store sales declined 1% in the quarter, and the fast-food chain said April numbers are tracking similarly. Comparable sales were down in all three of its major regions -- the U.S., Europe, and Asia-Pacific.  Earnings per share for the quarter moved up to $1.26 -- $0.01 below estimates -- and overall revenue rose slightly by 0.9%, to $6.61 billion, beating estimates of $6.59 billion.

For GE, the recent financial crisis struck a blow, but management took advantage of the market's dip to make strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader. At the same time, you need to be aware of the threats to GE's portfolio. To help, we're offering comprehensive coverage for investors in a premium report on General Electric, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE today. To get started, click here now.


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  • Report this Comment On April 20, 2013, at 1:30 PM, uptime100 wrote:

    I understand that everyone likes to work the numbers and state the obvious things written in the GE reports. The Power and Water divisions of industrial impacted the possible revenue by 6% (Power and water make up 14% of GE’s revenue) and that Europe impacted the business. No one mentions that GE Capital is operating in top gear and makes up 33% of GE revenues. Wait a minute – That means that 86% of GE Businesses made up the difference to meet and exceed the street unadjusted. I am sure in the years to come that GE will have all systems running in high gear. The report tells me that there is a 6% increase in the near future. Given the purchases that GE will be able to make with the funds available –Well you keep selling and I’ll keep buying. A reason to buy GE is that when some are down others are up. I wonder how some businesses would look if they listed the revenues of each type of burger, jewelry, or dress they sold. Just one of many opinions.

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