Though it was able to eke out a small gain before the closing bell yesterday, the Dow Jones Industrial Average (DJINDICES: ^DJI ) is headed south this morning. With a loss of 107 points as of 11:45 a.m. EDT, and only three component stocks out of the red, the Dow has some serious challenges ahead of it today before it can get back into positive territory. Investors may be taking a break as they head into the weekend with the anticipation of a lot more economic data producing plenty of activity next week.
Investors aren't getting much by way of headlines today for either economic news or earnings reports. Though this morning's consumer sentiment index report showed that sentiment is at a six-year high, there was little reaction in the markets. The trend of higher confidence in the economy signals opportunities for the second half of the year as consumers may increase spending as their beliefs in the strengthening economy are realized.
But the real news that will impact the market comes next week, as the latest data on the second-quarter GDP figures, nonfarm payroll data, and Federal Open Market Committee meeting all create a sense of anticipation as we close out this trading week. And with earnings season about halfway over, investors may be feeling that the results thus far have been lackluster. Waiting for the second half may be a sign of investors feeling that more opportunity lies ahead.
Though the big four banks topped analyst estimates all around, they aren't getting any favorable treatment today. In fact, financials are some of the biggest laggards within the Dow this morning. American Express (NYSE: AXP ) is leading the financials down this morning with a 1.53% loss. Though this morning's consumer sentiment index reading suggests potential for higher consumer spending in the future, the personal finance company is not benefiting from those expectations. The company has been fighting investor expectations for revenue cuts based on the European Union's plan to establish limits on transactional fees. And despite a brief reprieve earlier in the week when the company directly addressed the concerns and stated that any limits initiated would not impact its business in a substantial way, future proposals of the same nature could lead to difficulty in the company's ability to remain competitive.
JPMorgan (NYSE: JPM ) follows AmEx this morning in the list of laggards. News that the bank has settled with MF Global over a recovery claim was a win for the bank, but other news in the banking world may have investors concerned. UBS recently settled with Freddie Mac and Fannie Mae over misrepresented mortgage-backed bonds sold to the two governmental institutions for $885 million. The settlement could set a precedent for the two GSEs to seek damages from other banks on similar terms. Bank of America (NYSE: BAC ) is the least of the financial laggards for the Dow this morning so far, as the bank faces similar concerns from investors as JPMorgan over the UBS settlement.
Follow the herd?
Though it's not often recommended, taking a break with the rest of the market today may actually be a good idea. If you find yourself following the goings-on every day, you may burn yourself out overanalyzing data that doesn't impact your investment as much as you initially believed. But mimicking the trends of Mr. Market on any other occasion would be highly discouraged.
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