Dow Inches Higher on Caterpillar Earnings

The Dow Jones Industrial Average (DJINDICES: ^DJI  )  traded mostly mixed today as investors reacted to an ambiguous earnings season thus far, finishing the day up 0.1%. Even then, it was the worst performer among the three major indexes. Stock downgrades weighed on the blue chips, while Caterpillar (NYSE: CAT  ) shares jumped despite missing earnings estimates.

In the meantime, March existing home sales numbers landed slightly below expectations. The National Association of Retailers said home sales last month totaled 4.92 million, below projections of 5.01 million. Still, sales were up more than 10% from a year ago, indicating the housing market is still improving, though perhaps not as quickly as some had hoped.

Caterpillar, the world's largest maker of earth-moving equipment, opened the day essentially flat but gained in the afternoon to finish up 2.8%. The manufacturer reported per-share first-quarter profit down 45% to $1.31, and total revenue down 17% to $13.21 billion. Both figures missed estimates by about 4%. Management also lowered its full-year EPS guidance to $7 a share, while analysts had projected $7.67 a share. Still, trading near its 52-week low, the stock was up as CEO Doug Oberhelman said he thought mining purchases had hit bottom, and pointed to an increase in sales in China as another positive. The  company also plans to buy back about $1 billion worth of shares, its first such program since 2008.

Caterpillar wasn't the only stock flying higher today as Microsoft (NASDAQ: MSFT  ) took first prize on the Dow, jumping 3.6% to a new six-month high. The surge seemed to come from revelations that investment fund ValueACT bought a $2 billion stake in the Windows maker. ValueACT CEO Jeffery Ubben said he sees Microsoft's future in cloud computing, saying that in three to five years, "We'll stop talking about PC cycles and instead talk about Microsoft as the largest cloud-computing company in the world," which seems like a bold prediction at this point.

Two Dow stocks were getting hit on downgrades today. In its first session since getting slugged with a 4% drop on a poor earnings report, General Electric (NYSE: GE  ) fell another 1.8% after a downgrade by JPMorgan Chase from buy to neutral. The Wall Street bank pointed to negative industrial growth, and said it no longer sees it as a safety stock. UnitedHealth (NYSE: UNH  ) shares were off 1.4% following a similarly dismal earnings report last week.  UBS lowered its EPS estimates for the next two years on concerns about cuts as a result of sequestration.

Caterpillar is the market share leader in an industry in which size matters, and its quality products, extensive service network, and unparalleled brand strength combine to give it solid competitive advantages. Read all about Caterpillar's strengths and weaknesses in The Motley Fool's brand-new report. Just click here to access it now.


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