The Fed's Stimulus Questions Drag Down the Dow

Stocks have turned down to start the new week, and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) has sunk into the red on this Monday. More than half of the blue chip index's members are falling so far, helping the Dow to lose 50 points, or around 0.4%, as of 2:15 p.m. EDT. News from the Federal Reserve's stimulus program has prompted some investors to back off of the recent run-up on the markets-here's what you need to know.

A slowdown ahead for the Fed?
On Friday, The Wall Street Journal reported the Fed's plan to slowly decrease its current $85 billion per month bond-buying measure, weaning the markets off of stimulus gradually while keeping an eye on employment and inflation. Investors had to know the stimulus program would end eventually, although considering how well stocks have performed on the back of easy money, any disappointment from Wall Street over a potential end to quantitative easing comes as little surprise. The Fed hasn't released any definitive start date for winding down its latest QE measure yet, but with unemployment recently falling to 7.5%, the central bank seems more confident in the economy's footing.

The report hasn't hurt bank stocks one bit today however, and JPMorgan's (NYSE: JPM  ) shares have jumped higher, gaining 1%. Company CEO and Chairman Jamie Dimon continues to battle some shareholders who feel his two roles should be split up, a move that could reportedly lead to Dimon's resignation from the firm. Despite the mishaps of Dimon's tenure at the bank, most notably the multibillion dollar losses of the "London Whale" fiasco, some analysts have cautioned that the CEO's departure could lead to a big drop in JPMorgan's stock.

On the other side of the Dow, AT&T (NYSE: T  ) shares rank among the index's leading laggards, dropping 1% so far. Reports have surfaced that AT&T will drop the HTC First phone from its lineup after recording poor sales from the phone. Just a month after unveiling the phone, AT&T slashed its price on the First to just $0.99. That wasn't a good sign for a device that arrived to much fanfare with the new Facebook Home software pre-installed. With AT&T selling other phones from rivals at a much better clip, such as Samsung's Galaxy series, the Facebook phone's time seems to have come to an end for this carrier.

That's a good thing for AT&T, as it still trails leading wireless carrier Verizon (NYSE: VZ  ) . Verizon's also mired in the red today, with shares losing 0.6%, but the company's surging ahead by preparing a new Nokia Lumia phone to hit shelves soon, the Lumia 928. Verizon announced that the phone will be available on May 16, priced at $150 with a two-year contract. Nokia's Lumia line hasn't succeeded in the U.S. in the past, but some industry observers believe the company's partnership with Verizon for the 928 will help its sluggish American sales.

Finally, Alcoa (NYSE: AA  ) shares are leading all Dow stocks in the red today, as the aluminum manufacturer's stock has fallen 1.7%. Alcoa's been one of the worst-performing stocks on the index in 2013 as its shares have fallen victim to slumping prices across the materials sector. The company received a boost last week when China reported stronger trade data than expected. Alcoa needs China's economy to dig out of its current slowdown, an event that has crippled the industrials sector across the board. With other leading economies still crawling out of the recession's depth, China's growth can save -- or sink -- this industry.

Materials industries are traditionally known for their high barriers to entry, and the aluminum industry is no exception. Controlling about 15% of global production in this highly consolidated industry, Alcoa is in prime position to take advantage of growth that some expect will lead to total industry revenue approaching $160 billion by 2017. Based on this prospect and several other company-specific factors, Alcoa is certainly worth a closer look. For a Foolish investment perspective on this global giant simply click here now to get started.


Read/Post Comments (0) | Recommend This Article (1)

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.

Be the first one to comment on this article.

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: 2427222, ~/Articles/ArticleHandler.aspx, 8/22/2014 5:57:45 PM

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...


Advertisement