Consumers Send the Dow Higher, But Tech Stocks Are Leading the Charge

Positive economic data was instrumental in pushing the Dow up Friday morning, and Microsoft was the biggest gainer. Find out why here.

Mar 28, 2014 at 11:00AM

On Friday morning, the Dow Jones Industrials (DJINDICES:^DJI) climbed higher from the start, as signs that a frosty winter didn't completely freeze the U.S. economy made investors more optimistic about the potential for growth during the rest of 2014. The Commerce Department reported that personal income and personal spending both rose 0.3% in February, marking slow but steady improvement that could accelerate during the spring thaw. In response, the Dow was up 145 points as of 11 a.m. EDT. But interestingly, consumer stocks weren't leading the Dow higher, as technology titans Microsoft (NASDAQ:MSFT) and Cisco Systems (NASDAQ:CSCO) held that honor, along with pharma giant Merck.


Microsoft climbed almost 3% this morning in the aftermath of its much-heralded release of its Office software for Apple's iPad. Yet even as analysts disagree about whether Office will get a big following among iPad users, what's likely behind Microsoft's big move higher is simply the assertive vision from new CEO Satya Nadella. After a long period during which former CEO Steve Ballmer was on his way out and uncertainty plagued the tech giant, Microsoft investors are happy to see the company embrace the new growth opportunities from mobile and cloud computing. Even though competition is fierce in the arena, just the attempt to become more relevant has lifted Microsoft stock to much greater heights than many of its tech peers have seen lately; that's good news for Nadella and his management team in their transition to power.


Microsoft CEO Satya Nadella. Source: Wikimedia Commons.

Cisco also jumped 2% as investors look more closely at its own cloud-computing initiative. Cisco stock hasn't done nearly as well as Microsoft lately, as investors see the networking specialist as having a harder time adapting itself to the new reality of the tech world. Microsoft has long managed a more diverse set of offerings as a tech conglomerate, putting it in better position to drive expansion opportunities and find new areas on which to capitalize. By contrast, Cisco trying to move beyond its networking and communications niche, and the growing pains have been difficult as the company and other tech players invade each other's traditional territory. Cisco has a much tougher road to walk than Microsoft in order to regain its past success, and longtime CEO John Chambers hasn't yet seen the success that Nadella is having in convincing investors that better times are ahead.

Consumers will keep driving the Dow's long-term performance, but that doesn't mean consumer stocks are the ones that will necessarily benefit the most from a stronger economy. Keep your eye on well-known tech companies like Microsoft and Cisco to see how they respond to rapidly changing conditions in their industry.


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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."

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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." 

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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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