Why These 4 Stocks Were the Dow's Only Losers

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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.

Bullish investors kept the market moving upward today, as continued signs of global economic growth and geopolitical stability allowed stocks to retain their momentum from yesterday's big gains. By the close, the Dow Jones Industrials (DJINDICES: ^DJI  ) finished up more than 127 points. Other financial markets reacted mostly in their usual behavior patterns, with prices of oil and gold posting steep losses in light of a possible peaceful resolution to the chemical weapons controversy in Syria. Bond yields rose, with the 10-year Treasury once more approaching the 3% mark.

Today's big news was the Dow's shifting of components, with three companies to be booted out later this month and replaced by three new Dow members. Two of the Dow's decliners today were stocks on the losing end of that shift. Alcoa (NYSE: AA  ) fell 0.3% as the exit of the aluminum giant from the much-followed market average only marks the latest in a long string of difficulties. The company released a statement reemphasizing its focus on the elements of its business it can control, but with a market capitalization of less than $9 billion and no imminent prospects for a recovery anytime soon, Alcoa was the least controversial of the three stocks chosen for relegation out of the Dow.

Hewlett-Packard (NYSE: HPQ  ) , on the other hand, has more of a reason to be annoyed with the Dow Index Committee. With shares having almost doubled from their November lows, HP had already convinced investors of the strength of its turnaround strategy. Yet the sluggish pace of that strategic shift away from the PC might have made the decision to evict HP from the Dow a bit easier, and investors were disappointed, sending the shares down 0.4% today.

Beyond the Dow's restructuring, two other stocks fell. ExxonMobil (NYSE: XOM  ) lost a quarter percent, likely in light of the drop in oil prices. Longer term, though, Exxon faces the difficult challenge of maintaining its massive size by finding major new projects to offset production declines elsewhere. The cash flows that Exxon brings in finance big share buybacks that help keep earnings per share up, but it takes increasing effort for the energy giant to stay on top of its game.

Finally, Procter & Gamble (NYSE: PG  ) dropped 0.3%. Even with its 3% dividend, investors might be nervous about P&G's fairly rich earnings multiple. Trading at 20 times earnings, P&G's growth prospects have come into question, although the company has taken steps to try to reignite its growth engines. In addition, defensive dividend stocks have started to trade more closely with the bond market, and as bond prices fall, they've pressured some of the lower-growth dividend giants in the stock market as well.

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Related Tickers

9/30/2016 5:01 PM
^DJI $18308.15 Up +164.70 +0.91%
AA $10.14 Up +0.18 +1.81%
Alcoa CAPS Rating: ***
PG $89.75 Up +1.52 +1.72%
Procter and Gamble CAPS Rating: ****
XOM $87.28 Up +0.82 +0.95%
ExxonMobil CAPS Rating: ****
HPQ $15.53 Up +0.14 +0.91%
HP CAPS Rating: ***