Rollercoaster Ride on Wall Street Continues

After rising 155 points and then closing the day down 80 points yesterday, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) has reversed its course today, falling 125 points this morning before recovering nearly all of the day's losses. As of 12:5 p.m. EDT the index is down a negligible two points. The other major U.S. indexes are more firmly in the red: The S&P 500 is down 0.3%, and the Nasdaq is lower by 0.13%.

This morning investors sold off stocks after China's industrial purchasing was reported to be weak and the Japanese market lost 7% of its value. But a positive housing report and another decline in unemployment claims here at home have the markets turning around. Initial jobless claims dropped by 23,000 last week to a seasonally adjusted 340,000, where economists were expecting 345,000 claims.

Despite the encouraging housing reports released yesterday and this morning, shares of Home Depot (NYSE: HD  ) are down 1% today. Yesterday it was reported that existing-home sales rose by 0.6% in April and that the average time on the market fell, while prices increased. Today, the Department of Commerce reported that the number of contracts signed to purchase new single-family homes rose by 2.3% in April to a seasonally adjusted rate of 454,000, whereas economists were only expecting 425,000. But these are backward-looking indicators, and investors may be focusing on the future and how the Federal Reserve may tighten interest rates sooner than many expect, which would surely hurt the housing market and Home Depot.

Shares of Alcoa (NYSE: AA  ) are down 1.6% this afternoon. The likely cause for the decline is the poor industrial-purchasing activity in China. Alcoa and the global aluminum industry in general need Chinese production and construction to be strong in order to turn a profit. Over the past year we have seen aluminum inventory levels in China increase, causing the price of the metal to plummet. This recent slowdown may cause stockpiles to begin growing again, further reducing the price of aluminum on the open market.

Shares of General Electric (NYSE: GE  ) are down 0.9% after the company announced yesterday that it is considering spinning off GE Capital. As part of the company's plan to reduce it size, it would take GE Capital to the capital markets and offer it up in an IPO. The move would likely lower GE's financial risk and allow the company to build a stronger foundation and become a more stable corporation, but it would also lower the company's profit. In 2013 alone, GE Capital is expected to pay GE $6.5 billion in dividends. 

More foolish insight
The financial crisis dealt GE a major 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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