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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.
After a number of days during which the Dow Jones Industrial Average (DJINDICES: ^DJI ) and the S&P 500 both rose above their historic 16,000 and 1,800 marks during intraday trading but couldn't manage to hold those levels, both indexes finally held on and closed above the marks on Friday. The Dow Jones ended the week at 16,064, and for the five-day period the index closed higher by 103 points or 0.64%. The S&P 500 finished the week at 1,804, higher by 6.58 points, or 0.36%, for the week, while the Nasdaq gained 0.14% over that time frame.
With a number of retailers reporting earnings this past week, the focus seemed to be on consumers, who for the most part aren't showing overwhelming strength but continue to impress and surprise investors anyway. During October, retail sales figures rose 0.4% over September, which wasn't expected, given the government shutdown in October. Economists had predicted a flat performance. Still, retailers generally aren't expecting the holiday shopping season to be a very good one, as a number of them have lowered fourth-quarter guidance, which sent their stock prices falling.
Before we jump into the Dow's big losers of the week, let's check out its top performer. JPMorgan Chase (NYSE: JPM ) saw its shares rise 4.72%, even after paying a $13 billion fine in a settlement with the Justice Department indicating that the megabank had mishandled residential mortgage-backed securities before and at the outset of the financial crisis. That fine is on top of the $4.5 billion it agreed to pay the institutional investors who made the same claims. The $13 billion alone represents around half of the company's profits for the year, but it's not going to materially damage the company.
Last week's big losers
IBM (NYSE: IBM ) dropped 1.54% on Friday afternoon, which was enough to pull the stock lower by 1.03% for the week and land the blue-chip on the Dow's list of losers. The move on Friday came as Stan Druckenmiller, a well-known hedge fund manager who has one of the best records in the industry over the past three decades, announced that he was shorting IBM. Druckenmiller thinks the company's business will be replaced by cloud computing. IBM has seen sales decline the past six consecutive quarters, and although the company does operate in the cloud business, the amount of revenue it generates from that unit doesn't compare with what its hardware business makes.
For the second week in a row, Caterpillar (NYSE: CAT ) lands on the list of the top three Dow losers. Shares fell 1.02% during the past five trading days after declining 0.59% the previous week. This week, Caterpillar reported that sales fell again in October. The company has seen sales continue to gradually fall almost this whole year. Not only is the company performing poorly in Europe and here at home, but now sales are also beginning to take a hit in emerging markets and in the once extremely fast-growing and profitable Asia-Pacific region. It will be a long road to get back to the sales levels Caterpillar once enjoyed. Investors will have to either be extremely patient or begin looking for better opportunities to park their cash.
And lastly, Home Depot (NYSE: HD ) was the worst-performing Dow component, down 1.06% despite reporting a solid quarter this past week. The stock has been on quite the roller coaster lately. Three weeks ago, the home-improvement retailer found itself on the loser list after dropping 1.96%, but a week later it was the Dow's top performer, gaining 6.2%. The impact of interest rates on the housing market is having an effect, and the stock will probably continue to be volatile in anticipation of even higher rates when the Federal Reserve begins tapering its bond-buying program. We don't know how those changes will affect the housing market, but the company is still positioned to perform well even if housing starts begin to slow.
The other Dow losers this week:
- AT&T, down 0.2%
- Boeing, down 0.08%
- Cisco, down 0.37%
- DuPont, down 0.66%
- ExxonMobil, down 0.27%
- General Electric, down 0.44%
- Microsoft, down 0.71%
- Nike, down 0.44%
- Pfizer, down 0.24%
- Verizon, down 0.17%
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