Why the Dow Bounced Back With 108-Point Gains Today

Lumber Liquidators and Lions Gate Entertainment head in different directions; Wal-Mart aids Dow advance

Mar 20, 2014 at 6:36PM

Following yesterday's 114-point pullback, 25 out of 30 stocks in the Dow Jones Industrial Average (DJINDICES:^DJI) finished in positive territory Thursday, as industrial production picked up. The Philadelphia Fed Survey swung decisively into positive territory in March, showing an uptick in manufacturing activity, and an implied optimism going forward. Wall Street's short attention span worked to its benefit today, and investors forgot Wednesday's interest rate fears, bidding the Dow 108 points, or 0.7%, higher, as it finished at 16,331.

Wal-Mart (NYSE:WMT) shares didn't hurt the blue chip index either; the stock tacked on 1.3% in trading today. Judging by its actions this week, the megaretailer isn't satisfied with its current position as one of the world's corporate titans, as it looks for ways to expand and grow. For example, Wal-Mart announced plans on Monday to encroach on Game Stop's bread-and-butter used video game business, offering trade-ins for store credit or cash. It's also beginning an aggressive spring sales push on outdoor merchandise, announced today, which will likely earn Wally World even more foot traffic.

Like the Dow, shares of Lions Gate Entertainment (NYSE:LGF) bounced back from a lousy performance yesterday, gaining 2.8% after a 5% slump on Wednesday. Shares are extra-rocky this week as investors anxiously await the Friday release of Divergent, the first of three films inspired by the book trilogy of the same name. Lions Gate decided to stick with the formula it used in the wildly successful Hunger Games films: Buy the movie rights to an insanely popular series of recent novels, and laugh all the way to the bank. With critics panning Divergent in early screenings, this won't be another Hunger Games, so it's a good thing Lions Gate has two more flicks to go in the latter series.

Lastly, flooring retailer Lumber Liquidators (NYSE:LL) shed 4.6% on Thursday. Sales of existing homes in February fell 7.1% from February of last year, as higher home prices make buyers a bit more hesitant. Few stocks have capitalized on the resurgent housing market like Lumber Liquidators, which has quadrupled in the last three years alone. As low interest rates, refinancing, and the economic recovery gave people more money to remodel, Lumber Liquidators saw profits nearly triple from $26 million in 2011 to $74 million in 2013. With the refi market cooling down, and today's data showing waning home sales, I don't blame investors for liquidating this stock.

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John Divine has no position in any stocks mentioned. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

The Motley Fool recommends Lumber Liquidators. The Motley Fool owns shares of GameStop and Lumber Liquidators. 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.

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