Caterpillar Picks Up Steam as the Dow Ends the Week in the Green

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.

After a morning session that saw the Dow Jones Industrial Average (DJINDICES: ^DJI  ) lose more than 100 points, stocks across the markets have rebounded nicely this afternoon. As of 2:25 p.m. EDT, the Dow is up 57 points, with most of the blue-chip index's stocks in the green. The index hasn't been held back by a weak jobs report showing a U.S. labor market in flux. Let's catch up on the stock action you need to know about.

Gloom settles over the labor market
The labor force isn't seeing much of an uptick -- at least, certainly not in August. While August's unemployment rate declined from 7.4% to 7.3%, the U.S. economy added just 169,000 jobs for the month, falling slightly below economist predictions. Worse, America's labor participation rate declined to 63.2%, a multidecade low that has come about as more and more out-of-work Americans give up on job-hunting.

However, the labor market pessimism hasn't hurt stocks too badly despite this morning's drastic fall. Caterpillar (NYSE: CAT  ) ranks among the Dow's leaders today, with shares gaining 1.2%. It's been a rough road for Caterpillar in 2013, with the stock gaining just 1.8% year to date. Morgan Stanley didn't help yesterday when it cast a cautious outlook for the company's future, saying Catepillar's visions of growing construction-equipment demand could go unrealized if the mining sector can't rebound from its serious slump.

Yet that business hasn't even been Caterpillar's worst segment in 2013. Construction equipment does account for the second-largest part of the company's sales, and the segment's revenue fell 13% year over year in the first half of 2013, with Asia-Pacific sales seeing a particularly steep decline. However, Caterpillar's resource-industries unit isn't far behind in terms of overall revenue through the year's first half, and in that time span, resource-industries sales plummeted 29%, including a 44% fall in the Asia-Pacific region. Caterpillar will need more than just one of its core businesses to kick-start revenue growth if it wants to turn its fortunes around.

UnitedHealth (NYSE: UNH  ) is also having a nice day so far, with shares up 0.7%. Unlike Caterpillar, this stock has had a wonderful run in 2013: UnitedHealth's shares are up more than 37% year to date. What has helped drive this run? Besides the company's size -- UnitedHealth is America's largest publicly traded private insurer by membership -- the company has also managed to keep premium growth surging higher. Premium revenue grew by 11% over the first year of 2013.

In the insurance industry, however, all eyes are watching the arrival of health care reform in 2014. While the Kaiser Family Foundation recently released   a study showing that Obamacare premiums might not rise as much as anticipated through reform, UnitedHealth has taken a cautious approach to state-run insurance exchanges. Considering the influx of perhaps millions of previously uninsured Americans into the insurance exchanges next year and the potential costs that could follow, UnitedHealth's approach looks like a good move for investors for now.

Still in the dark about how Obamacare might affect you and your portfolio? Don't worry -- you're not alone. To help prepare investors for the massive changes coming to the American health-care system, The Motley Fool created a special free report that makes this complex topic easily understandable. Download "Everything You Need to Know About Obamacare" and discover how the law may impact your taxes, health insurance, and investments. Click here for your free copy today.


Read/Post Comments (0) | Recommend This Article (1)

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.

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: 2626131, ~/Articles/ArticleHandler.aspx, 11/26/2014 5:09:47 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...


Advertisement