Why Today's Dow Gains Weren't Just About Disney

The Dow soared 188 points today, as Disney's earnings were strong. But be sure to look at the other factors that helped the stock market regain ground today.

Feb 6, 2014 at 9:03PM

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 year 2014 has been disappointing for stock market investors so far, so today's jump of 188 points for the Dow Jones Industrials (DJINDICES:^DJI) was a welcome respite from the declines that we've seen during the first five weeks of the year. Disney (NYSE:DIS) dominated the headlines with its strong earnings report, which lifted the entertainment giant's shares by more than 5% today. But of even greater importance was the breadth of today's rally, with all but three components in the Dow gaining ground, and with key stocks Visa (NYSE:V), Caterpillar (NYSE:CAT), and American Express (NYSE:AXP) all pointing toward hopes for greater strength in the U.S. economy.

Disney's numbers were unquestionably good, but they weren't entirely unanticipated. Disney has set the stage for strong growth for years, with its strategic acquisitions of content-rich production businesses helping Disney's studio entertainment division post monumental gains of 23% in revenue and 75% in operating income. If anything, the stock's huge gains today only reflect the immense pessimism that had overtaken the market broadly in recent weeks.

But potentially far more important for the Dow's future prospects were continuing gains in other stocks. Caterpillar's 2% rise seems inconsistent with the fears that many have about prospects for the construction and mining industries both in the U.S. and in key emerging markets like China. But given the hit the stock has taken in recent years, Caterpillar now has shareholders increasingly convinced that the worst times could be over, and that even a delayed pickup in construction and mining activity will eventually pan out in greater profits.

At the same time, Visa and American Express both posted solid gains of 1.5% to 2.5% today, and their measurement of the willingness of consumers to spend remains a key component of overall economic growth. In particular, AmEx has its finger on the pulse of the high-end consumer, while Visa has a broader base to provide a different view of the same general trend. As long as both of those companies remain strong from a business perspective, it'll be hard to think of any drop in the market as being anything but a short-term aberration.

Headlines often trumpet the story of the day, but it's important to keep a broader perspective. Only by looking at all the crosscurrents in the market can you put together a complete picture of the health of the market.

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Dan Caplinger owns shares of Walt Disney. The Motley Fool recommends American Express, Visa, and Walt Disney. The Motley Fool owns shares of Visa and Walt Disney. 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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