Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Rate-Sensitive Stocks Limited the Dow's Gains Today

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

It's not often that bullish investors are disappointed with a 106-point gain for the Dow Jones Industrials (DJINDICES: ^DJI  ) , especially one that leaves the average at an all-time record high. But with early gains that were more than double that, the triple-digit gain for the Dow was a bit of a letdown, especially in light of favorable domestic data on home prices and consumer confidence. Yet good news on the economic front has been no guarantee of stock market success, given that investors are more concerned about the timing of the exit of the Federal Reserve in its bond-buying operations and other monetary-policy machinations. On that front, bond prices plunged today, with the 10-year Treasury yield rising above 2.1% for the first time in more than a year.

Moreover, several stocks posted substantial declines. Leading the way was AT&T (NYSE: T  ) , which dropped 1.5%. Fool contributor Travis Hoium earlier today highlighted the threat to AT&T and rival Verizon (NYSE: VZ  ) , which also fell more than 1%, noting that initiatives from Google could eventually threaten their entire business models. However, another reason for the drops is that telecom stocks are traditionally sensitive to interest rate fluctuation, as their dependable flows of customer subscription revenue closely resemble a bond-like income stream. If bond yields keep rising, then investors will want higher dividend yields from AT&T and Verizon, and that in turn will send shares lower.

Consumer giant Procter & Gamble (NYSE: PG  ) also fell today, posting a 1.25% decline. After soaring on Friday after news that the company had replaced its CEO with former top executive A.G. Lafley, P&G's stock might have reacted to the realization that the return of its former CEO won't necessarily vault the consumer-products company back to complete health without a substantial struggle. Lafley's main advantage is his knowledge and familiarity with the company, but P&G needs innovative products that will reestablish its leadership in the industry.

Finally, Exelon (NYSE: EXC  ) plunged 7.5% after getting downgraded by Deutsche Bank. The analyst highlighted a poor capacity auction last Friday as driving prices lower through 2016 or 2017, and with the continued pressure of low-cost natural gas for electricity production, Exelon won't be able to fully reap the benefits of the cost advantages that its nuclear power capacity often produces. Rising bond yields also take their toll on utilities, further exacerbating the declines.

Despite that troublesome long-term forecast from Deutsche Bank, many still see Exelon as being perfectly positioned to capitalize on having the largest nuclear fleet in North America. This strength, combined with an increased focus on balance sheet health and its recent merger with Constellation, places Exelon and its resized dividend on a shortlist of the top utilities. To determine if Exelon is a good long-term fit for your portfolio, you're invited to check out The Motley Fool's premium research report on the company. Simply click here now for instant access.

Read/Post Comments (0) | Recommend This Article (2)

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.

Compare Brokers

Fool Disclosure

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: 2456444, ~/Articles/ArticleHandler.aspx, 9/30/2016 9:36:30 AM

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...

Today's Market

updated 12 hours ago Sponsored by:
DOW 18,143.45 -195.79 0.00%
S&P 500 2,151.13 -20.24 0.00%
NASD 5,269.15 -49.39 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 4:35 PM
^DJI $18143.45 Down -195.79 +0.00%
EXC $33.29 Down -0.72 +0.00%
Exelon CAPS Rating: ****
PG $88.23 Down -1.23 +0.00%
Procter and Gamble CAPS Rating: ****
T $40.73 Down -0.12 +0.00%
AT and T CAPS Rating: ****
VZ $52.12 Up +0.06 +0.00%
Verizon Communicat… CAPS Rating: ****