These Winners Couldn't Send the Dow to Another Record

If you look through some explanations of why the Dow Jones Industrials (DJINDICES: ^DJI  ) failed to set a new record today, you'll find a common theme: Investors are worried about a potential correction. Yet the problem with that hypothesis is that investors have been worried about a correction for months now, if not years, and the market hasn't hesitated to climb higher regardless. With a decline of just 19 points for the Dow and similarly insignificant declines for the broader market, reading too much into the day's activity will lead you to false conclusions about what in reality isn't any change in sentiment among investors.

Moreover, focusing too much on pessimistic sentiment will distract you from pockets of optimism within certain sectors. For instance, Alcoa (NYSE: AA  ) climbed 1.7% today as investors continued to applaud the company's decision last week to shut down two of its Canadian production lines and to delay the construction of a new line for at least six years. With aluminum prices remaining stubbornly weak, Alcoa's move at the Baie-Comeau smelter in Quebec represents the latest in a series of strategic decisions designed to reduce overall supply and support long-term price increases for the metal. Even though it will take time for conditions to improve, Alcoa has demonstrated its willingness to make tough decisions in order to put itself in the best position to benefit from favorable long-term trends toward greater future use of aluminum.

American Express (NYSE: AXP  ) picked up 1.5% on a quiet day on the news front from the credit card giant. As Fool contributor Dan Carroll pointed out earlier today, AmEx stands to benefit from increasing confidence from consumers, as its profits depend on maximizing transaction volumes. With delinquencies having fallen dramatically in recent years, AmEx stands to see more of its revenue make its way to its bottom line. Also, AmEx's strategy to reach out to lower-income cardholders through its Bluebird offering could well pay off with a broadening customer base for offering other higher-margin services.

Finally, beyond the Dow, Peregrine Pharmaceuticals (NASDAQ: PPHM  ) jumped 19% on news that it had decided to run a phase 3 trial of its bavituximab lung-cancer treatment. The company's characterization of its having "reached agreement with the FDA" might have been confusing to some investors, as the stock had been up more than 30% earlier in the day before falling back as investors had time to consider the true impact the study could have on Peregrine. As Fool contributor Brian Orelli pointed out earlier today, Peregrine's dwindling cash balance might have led the company to choose to accelerate its research in an attempt to get the drug through the FDA approval process more quickly.

Materials industries are traditionally known for their high barriers to entry, and the aluminum industry is no exception. 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.


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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 May 20, 2013, at 9:23 PM, raulia wrote:

    PPHM will bounce more than SRPT,It will cross $5 in next four trading sessions.

  • Report this Comment On May 21, 2013, at 1:29 AM, BSDetector wrote:

    I am impressed; four PPHM hit pieces in one afternoon. Reminds me of the good old days when Matt Herper was churing out 8 hit pieces against ARNA in a single week.

    I'd like to give you guys two small hints:

    1. Getting the FDA nod for phase III is a very big deal. Many of your hack articles are claiming it's an everyday occurance for biotech companies.

    2. PPHM will NOT be funding phase III by themselves. That's the most ridiculous statement I've heard in months. Partners fund large phase III trials and bring plenty of cash to the table as well (hence much higher PPS). Simple logic would lead one to understand the fact that potential partners would want to see a positive FDA nod before finalizing negotiations.

    The stuff that you guys churn out is some of the best fiction on the market. It appears to me that Peregrine is not the only company hiring by scores (you failed to mention that tiny fact). It l looks like The Street has expanded is hit piece staff tremendously. Congrats on your new employment. Try including a few actual facts in your next article.

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