Why the Dow Just Wants August to End

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

As the month of August comes to a close, the stock market is once again showing how confused investors are about the future. On one hand, the growing belief that the Federal Reserve will start to scale back its bond-purchasing activity suggests that the U.S. economy has stabilized and no longer needs outside assistance to stimulate economic activity. Yet today's reading on consumer sentiment showed a drop of three points to 82.1, and although that drop was less dramatic than expected, investors don't want to see consumers lose confidence in their ability to spend and support overall economic growth. As of 10:55 a.m. EDT, the Dow Jones Industrials (DJINDICES: ^DJI  ) are down 49 points, bringing their total decline for the month to almost 700 points, or more than 4%.

Tech stocks lead the Dow lower, with Hewlett-Packard (NYSE: HPQ  ) and Microsoft (NASDAQ: MSFT  ) falling about 1% each. Two pieces of news likely played a role in their declines. First, a report yesterday showed that sale growth in PCs has started to slow down even in emerging markets, which have until now been a bastion of strength against poor sales in the U.S. and Europe. Despite efforts to diversify their respective businesses away from the beleaguered sector, both Microsoft and HP still rely heavily on PC-related revenue.

Second, favorable earnings news from salesforce.com (NYSE: CRM  ) could spell difficulty in the efforts that HP and Microsoft have made to expand their presence in the cloud-computing area. Salesforce has climbed more than 13%, and analysts point to the company's smart acquisition strategy as playing a key role in helping to keep competition at bay. As the industry evolves, it will be increasingly hard for tech giants like Microsoft and HP to move as nimbly as smaller players like Salesforce.

Finally, Wal-Mart (NYSE: WMT  ) has picked up 0.6% after it announced plans to help promote greater manufacturing-plant safety in the nation of Bangladesh with a $50 million loan to factory owners there. The move aims to deflect criticism of labor practices in the Southeast-Asian nation, where the Rana Plaza industrial accident earlier this year led to greater attention to worldwide manufacturing practices. Taking action to protect its reputation on labor issues will be key to Wal-Mart's future success, especially in the U.S., where labor issues have gotten a lot more attention lately.

If Microsoft and HP appear to be losing the new-tech battle, then who will win it? Find out in the Fool's latest research report, "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate and give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!


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  • Report this Comment On August 30, 2013, at 4:28 PM, dannystrong wrote:

    The market's rise has been inflationary (where'd you think all those trillions the Fed's been printing went?). The Administration has trumpeted the rise in the market as proof their policies are working, hoping everybody will just ignore the weak fundamentals of the economy, and the giant elephant of Obamacare.

    The endless tweaking of Obamacare rules is putting bandaids (if you'll pardon the expression) on a program that always doomed to fail. Zealots hoped to duplicate the NHS (see comments by Reid), ignoring the joke the program has actually become.

    Changing the rules over and over again convinces job-creators that they simply have to wait and see what is actually going to happen before acting -- a process that will take years (lawsuits being what they are.) So they wait. So the market waits. And wonders exactly how much a bunch of folks who have never sold so much as a pair of shoes actually know about real economics.

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