Why the Dow Jumped 100 Points Today

Strong earnings from one of America's largest banks has the stock market higher today.

Jan 15, 2014 at 1:31PM

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.

The Dow Jones Industrial Average (DJINDICES:^DJI) is up 105 points, to 16,479, in early afternoon after better-than-expected earnings from former Dow component and megabank Bank of America (NYSE:BAC). The strong results raise the outlook for all other financial stocks that make up a large portion of the Dow. The S&P 500 (SNPINDEX:^GSPC) jumped eight points to 1,846 as of 1:30 p.m. EST.

Bank of America reported fourth-quarter earnings per share of $0.29, better than analyst expectations of $0.26 per share. Revenue came in at $22.3 billion, better than analyst expectations of $21.2 billion. While the bank was hurt by a steep drop in mortgage refinancing, that was more than balanced by a drop in loan losses, as well as a higher net interest margin, the rate at which the bank lends out money. CFO Bruce Thompson added that the bank's balance sheet is at its strongest level in its history. He added: "Capital and liquidity are at record levels, credit losses are at historic lows, our cost savings initiatives are on track and yielding significant savings, and our businesses are seeing good momentum."

Today's Dow leader
Today's Dow leader is Cisco (NASDAQ:CSCO), up 2% to $22.84. Cisco is up with the tech sector overall after Apple announced that its deal with China Mobile will help the company have its best ever quarter in China. Barron's magazine also recently took a closer look at Cisco and believes the stock is good for a 20% return in 2014. You can read more about that here.

The biggest mover of the Dow today, though, is Goldman Sachs (NYSE:GS), up 1.5% to $179.32 The Dow is structured as a price-weighted index, meaning companies with larger stock prices have proportionally larger effects on the index. This differs from the S&P 500, which is a market cap-weighted index in which companies with larger market caps have a proportionally larger impact. The Dow's antiquated methodology leads to things like Goldman having a nine times greater effect on the numbers than Cisco, even though Goldman Sachs is 33% smaller than Cisco in terms of market value. It's for this reason that I recommend investors learn to follow the S&P 500.

Goldman Sachs is rising today on the Bank of America earnings, as they raise the chance that Goldman Sachs' earnings will also be better than expected. Goldman Sachs reports quarterly earnings tomorrow morning before the market opens. Analysts expect earnings per share of $4.21 and revenue of $7.7 billion.

Many investors are terrified about investing in big banking stocks after the crash, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He owns shares of Bank of America and Cisco Systems. The Motley Fool recommends Bank of America, Cisco Systems, and Goldman Sachs. The Motley Fool owns shares of Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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