Why Wal-Mart, Procter & Gamble, and Johnson & Johnson are Missing Dow Rally

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 losing 264 points last week, Dow Jones Industrial Average (DJINDICES: ^DJI  )  has gained back a large portion of that decline in trading through early afternoon Monday. As of 1:05 p.m. EST the Dow is higher by 120 points, or 0.75%. The S&P 500 is higher by 0.53% and the Nasdaq has risen 0.56%. Unfortunately, not all the Dow's 30 components are in the black today, so let's take a look at why a few have been left behind.

Wal-Mart (NYSE: WMT  ) is trading lower by 0.45% after the company and other national retailers won a court case against credit card companies Visa and MasterCard on Friday. A federal judge in New York approved the card companies' $6 billion settlement over to the interchange fees they had charged. But the National Retail Federation and Wal-Mart are fighting the settlement, though not for more money. The NRF and Wal-Mart want changes to laws that pertain to the "swipe" fees the card companies can charge. Their objections state that the main provision in the ruling will not be effective in regulating swipe fees, and that the government must change the laws for credit card companies like it did with debit cards in 2010 with the Dodd-Frank law rule that limits the swipe fees the card issuer can charge the retailer. This is certainly going to be a hard-fought battle and one that doesn't seem likely to end anytime soon. Investors should just sit tight.  

Two other Dow components missing today's rally are Procter & Gamble (NYSE: PG  ) and Johnson & Johnson (NYSE: JNJ  ) . The two have fallen 0.80% and 0.18%, respectively, after the FDA released a proposed rule this morning that would make it more difficult for companies to make and sell anti-bacterial hand soaps. The FDA wants to require product manufacturers to prove that the soaps are more effective in preventing infection and spreading bacteria than just plain old water and soap. The agency stated that while consumers generally view these specialty products as a more effective way to prevent germs from spreading, there is no evidence that they are. Lastly, the FDA said this is part of a larger review to ensure the uses of anti-bacterial products are safe and effective.  

Investors should follow this story and see how it plays out, but they don't need to take any action at this time since this is just a proposed rule. It would take a long time for anything to actually change, thus allowing the companies to sell their inventory and not take a financial hit as a result of the changes.

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  • Report this Comment On December 16, 2013, at 8:40 PM, Corsair3117 wrote:

    Thanks for the reassurance on JNJ and PG. However, it was awkwardly phrased to suggest the firms can take advantage of bureaucratic delays to get rid of inventories of the anti-bacterial product then take it on the lam like thieves in the night. More likely, the products DO have superior germ fighting attributes than "good ol' soap and water" It's contrary to the mind set that academia has instilled in future bureaucrats for at least five decades and the long faces in D.C. when (at great expense) products like the effective (albeit ghastly-tasting) Listerine can put back on their labels "kills germs" etc because the evidence is truly on their side are properly offset by the wide grins of investors and QC, and R&D folk after the "guilty til proven innocent" show trials are over

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