The Real Reason the Dow's Taking a Breather This Morning

After yesterday's big record push for the stock market, stocks are pulling back modestly today. Most analysts are pointing to economic data as justifying the pullback, with the latest figures from the federal government showing employment growth of just 162,000 jobs in July -- its lowest level in four months. Moreover, given a drop in labor participation and downward revisions for past months, it's far from clear whether rank-and-file Americans are truly benefiting from the recovery, even with the unemployment rate falling to 7.4%. By 10:55 a.m. EDT, the Dow Jones Industrials (DJINDICES: ^DJI  ) were down 49 points, or 0.31%, while the S&P 500 (SNPINDEX: ^GSPC  ) slipped 0.21% but held above the 1,700 level it achieved for the first time yesterday.

But the real reason behind the Dow's uncertainty has to do with the varied situations of different companies. On one hand, this morning's earnings report from Chevron (NYSE: CVX  ) sent the stock down 2%. The company's quarterly profit dropped 26%, falling far short of analyst expectations. This supports the idea that major oil and gas producers will face long-term challenges in sustaining the growth rates that the pace of new discoveries has created in the recent past. Given the extent to which the energy industry is seen driving a new era in American competitiveness, adverse trends that hurt energy companies are an important warning sign to consider not only for the industry, but for U.S. economic prospects more generally.

At the same time, though, some industries are looking a lot more favorable. DuPont (NYSE: DD  ) added to its recent gains today, climbing more than 2% as investors continue to digest the possible implications of the company's purchase of a majority stake in South African company Pannar Seed. The agricultural industry has shown huge growth in the U.S., but the prospects in Africa are potentially even more lucrative, as untapped potential in the African ag market will require production-enhancing techniques in order to take maximum advantage. Such opportunities are likely why DuPont attracted the attention of investor Nelson Peltz, who reportedly bought a substantial position in DuPont recently. More broadly, they show the continuing promise of global growth as a key component of U.S. company strategy.

Investors also remain bullish about the prospects for technological advances throughout the economy. This morning LinkedIn (NYSE: LNKD  ) has jumped almost 11% after it reported expectation-beating earnings and was upgraded by multiple brokers. LinkedIn reflects arguably the most successful impact that social media has had on the economy, helping facilitate employment opportunities and streamline hiring and job hunting. So long as tech companies find ways to improve aspects of people's everyday lives, the industry should continue doing its fair share to bolster overall growth.

So long as these dueling trends fight against each other, you can expect continued pullbacks in the bull market from time to time. Yet with the economy still improving -- albeit not so fast as many would like -- the general direction for stocks is likely to remain up, at least until early warning signs show up in more concrete adverse economic data.

One such warning sign that investors have worried about for years is the budget deficit. With more than $10 trillion of new debt since 2000, investors worry that a rising national debt could hurt long-term growth. But in the Motley Fool's new free report, "Everything You Need to Know About the National Debt," Fool expert Morgan Housel gives you step-by-step explanations about how the government spends your money, where it gets tax revenue from, the future of spending, and what a $16 trillion debt means for our future. Click here to read the full report!

Read/Post Comments (1) | Recommend This Article (6)

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.

  • Report this Comment On August 02, 2013, at 11:45 AM, funfundvierzig wrote:

    Over 13 years ago, DD begin the millennium on Jan. 3, 2000 @ 65 and change. Today it is trading @ 59 and change. The now much shrunken DuPont has gone rigourously nowhere.

    DD's recent price surge does not reflect the excitement of a new blockbuster or breakthrough technology nor a superlative performance by DuPont "leaders". Unfortunately, the jacked-up price is a direct response to the high prospect of this struggling and long mismanaged conglomerate being broken up and sold or spun off! Running scared, DuPont's big bosses are trying frantically to put a happy public relations face on their fate.


Add your comment.

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: 2576380, ~/Articles/ArticleHandler.aspx, 9/29/2016 8:22:34 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 10 hours ago Sponsored by:
DOW 18,339.24 110.94 0.61%
S&P 500 2,171.37 11.44 0.53%
NASD 5,318.55 0.00 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

9/28/2016 5:27 PM
^DJI $18339.24 Up +110.94 +0.61%
^GSPC $2171.37 Up +11.44 +0.53%
S&P 500 INDEX CAPS Rating: No stars
CVX $102.15 Up +3.17 +3.20%
Chevron CAPS Rating: ****
DD $67.19 Down -0.07 -0.10%
DuPont CAPS Rating: ****
LNKD $192.29 Up +0.09 +0.05%
LinkedIn CAPS Rating: ***