Nike Helps the Dow Take a Breather After a Three-Day Drop

Markets rebound from a lousy week, driven more on sentiment than by any fundamental reason.

Apr 8, 2014 at 12:08PM

After a few days of gains and a few days of losses, American markets are getting a little tired of all the volatility. The Dow Jones Industrial Average (DJINDICES:^DJI) is trading up 0.2% at 12:05 p.m. EDT lunchtime after zig-zagging through a narrow pool of red ink in the morning. The landmark index closed out a three-day drop yesterday at roughly the same value -- 16,245 points -- at which it began a four-day move upward from late March. This up-and-down performance has effectively brought the Dow back to the closing level it reached in late January after a Dec. 31 peak. The S&P 500 (SNPINDEX: ^GSPC) is also showing modest signs of life after dropping back to its early January levels, with a 0.3% gain in early afternoon.


The Dow's rise is led by Nike's (NYSE:NKE) 2.6% pop, which is well ahead of second-place Caterpillar's (NYSE: CAT) 1.7% gain. Nike is the latest beneficiary of a wave of analyst upgrades that have buoyed Dow components in recent days, as Stifel Nicolaus boosted the sportswear superstar from hold to buy with a new price target of $87 per share. That gives Nike a purported 19% upside from today's pop, but this is of course a shorter-term analysis of the company's long-term growth prospects -- investors should appreciate the positive sentiment, but not lose sight of the fact that Nike still has a lot of the world left to conquer.

Roughly 335 of the S&P 500's components were trading higher (even if just 0.01% higher) shortly before lunchtime. The index's leaders are on two different ends of the energy spectrum -- First Solar (NASDAQ:FSLR) rose 5.7%, while coal producer Cliffs Natural Resources (NYSE: CLF) enjoyed a 5.3% pop.

First Solar continues to ride a wave of positive momentum in the wake of its latest financial guidance, but this news is arguably baked in already, so investors may be getting a bit ahead of themselves at this point. The median analyst price target of $61.50 per share is now 13% below First Solar's current share price. Cliffs Natural Resources likewise has no real news-based driver pushing its share price higher this morning, but could simply be the beneficiary of a sentiment-driven short squeeze -- no S&P 500 stock has a larger short interest than this miner.

These stocks don't have the market cap to propel the S&P higher, but two high-tech large-cap winners are helping to drive the index's gains today: (NASDAQ: AMZN) rose 2.6%, while Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) two share classes were up 2.8% and 3%, respectively. Investors are now clearly breaking toward the voting-class GOOGL shares, which are now trading at $556 apiece to the GOOG shares' $553 price.

GOOG Chart

GOOG data by YCharts.

Amazon's up on news that its Prime Instant Video service tripled in use over the past year, and it's now the third-largest streaming-video provider on the country, behind only Netflix (NASDAQ: NFLX) and Google's YouTube. Google's gains might simply be a reaction to the recent selling wave, but it's going to be interesting to track the divergence of the voting and nonvoting shares -- Google has pledged to pay out the difference should one class fall behind, and this promise could wind up costing billions if the gap is wide enough.

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Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.

The Motley Fool recommends, Google (A shares), Google (C shares), Netflix, and Nike. The Motley Fool owns shares of, Google (A shares), Google (C shares), Netflix, and Nike. 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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