Morning Dow Report: Microsoft, P&G Earnings Can't Lift the Dow

The Dow dropped again on continuing worries about emerging markets, despite solid upward moves from Procter & Gamble and Microsoft.

Jan 24, 2014 at 11:00AM

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.

Even in the middle of earnings season, global economic issues have started to play a key role in the stock market's moves in 2014. After spending much of 2013 focused almost solely on improving conditions in the U.S. economy, today's 166-point drop in the Dow Jones Industrials (DJINDICES:^DJI) as of 11 a.m. EST reflects some of the stresses in key foreign economies such as China. Even with favorable earnings reports that sent Microsoft (NASDAQ:MSFT) and Procter & Gamble (NYSE:PG) higher this morning, worries about emerging-market inflation and capital outflows show that even the U.S. market is vulnerable to financial crises overseas.

On the earnings front, Procter & Gamble led the Dow's gainers, rising 3.5% even as its quarterly earnings fell 16% from year-ago levels. The consumer-products giant was able to beat expectations, and investors are increasingly satisfied that the company has turned some previous challenges around and could continue to boost its growth prospects. Yet trouble in emerging markets could weigh on P&G's long-term results, especially given the importance of rising standards of living to increase the number of middle-class customers in those markets and boost sales of P&G products.

Similarly, Microsoft rose almost 2% after beating earnings estimates by a substantial margin. Strength in consumer hardware helped the tech juggernaut post earnings per share that were a dime higher than investors had expected. Still, Microsoft also could face headwinds if key emerging regions suffer economic slowdowns, as its handset strategy will likely involve trying to capture more market share internationally given its relatively weak position in the U.S.

More broadly, though, the Dow's poor performance today reflects the fact that almost all of the blue-chip index's 30 stocks have substantial international exposure, especially to emerging-market countries. Fast-food giant McDonald's (NYSE:MCD) has made China a key part of its overall growth strategy, and any headwinds in emerging markets could be a major stumbling block for future growth opportunities. Even if the U.S. economy recovers more strongly, the lesson from the increasingly global economy is that the Dow will feel the pain from international markets, and smart investors need to take that into account in making long-range investing decisions.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends McDonald's and Procter & Gamble. The Motley Fool owns shares of McDonald's and Microsoft. 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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