Dow Rises as the Tail Wags the Dog

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) has reversed this morning's steep losses and is up 0.37% as of 2:45 p.m. EDT as a disappointing jobs report and Syria-related concerns support the notion that the Federal Reserve will not soon begin to wind down its bond-buying program. In another case of the tail wagging the dog, we have to remind short-term investors that a strengthening economy that does not need the crutch of bond purchases is a good thing. Let's take a look at the employment numbers and some of the movers inside and outside the Dow today.

Not-so-great numbers
While at first glance a drop in the unemployment rate drop from 7.4% to 7.3% seems encouraging, that doesn't tell the whole story. The drop is not the result of job creation -- 169,000 new positions were added, short of the predicted 180,000 -- but rather of a decline in workforce participation. In addition to that miss, June and July's job numbers were revised downward by a combined 74,000.

McDonald's (NYSE: MCD  ) is one of the leading Dow components today, up 0.9%. The company is entering an interesting transition period in which it is changing its menu and updating its restaurants in order to boost profits and appeal to modern tastes. Regarding the former, McDonald's announced that it is testing a "Dollar Menu & More" across a few markets. It's also rolling out the new Mighty Wings menu item at the end of September. Regarding the latter, McDonald's is spending $3 billion to open 1,500 to 1,600 new restaurants globally, and it plans to reimage and modernize another 1,600.

Outside the Dow, Ford (NYSE: F  ) is taking a breather today, down 1.2% after a week full of good news sent the stock back up over the $17 mark. Ignore the talk of CEO Alan Mulally stepping down early and pay attention to the real headlines.

On Wednesday, Ford reported that its retail sales in the U.S. are up 20%, which was its best retail-sales month since August 2006. Its most profitable model and America's best-selling vehicle, the F-Series, topped 70,000 sales for the second month this year -- something it hasn't done since 2006. On Thursday Ford announced that its sales in China are up 50% this year to more than 551,000 wholesale units as the Focus continues to be a big winner in the region. Ford also announced Thursday that it delivered its best August in electric-vehicle sales. All the positive headlines were topped off today when S&P was the latest major ratings agency to upgrade Ford to "investment grade" -- well ahead of crosstown rival General Motors.

Caterpillar (NYSE: CAT  ) is also one of the Dow's biggest winners, up 1.1%. This is the second day in a row of gains for a company that has struggled as the global economic recovery drags on at a snail's pace. Caterpillar is also highly exposed to the mining end market, which is suffering from reduced demand and lower prices as China's economic activity has slowed. Caterpillar is the largest equipment-manufacturer in the industry, therefore it enjoys economies of scale, but its future seems dim until the global economic recovery gains more steam.

Tired of watching your stocks creep up year after year at a glacial pace? Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks -- and he wants to share it, along with a few of his favorite growth stock superstars, with you. It's a special free report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains and click click here for instant access to a whole new game plan of stock picks to help power your portfolio.


Read/Post Comments (0) | Recommend This Article (8)

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.

DocumentId: 2626195, ~/Articles/ArticleHandler.aspx, 4/16/2014 7:29:13 PM

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