Why Goldman Sachs and Pfizer Held Back the Dow Tuesday

The Dow managed to break its losing streak, but a 10-point rise didn't inspire much bullishness.

Apr 8, 2014 at 9:03PM

On Tuesday, the Dow Jones Industrials (DJINDICES:^DJI) broke its losing streak, although its gain of just 10 points did little to erase the more than 325 points the Dow had lost on Friday and Monday. Even though broader market measures posted more substantial gains today, the Dow had to overcome negative influences from Goldman Sachs (NYSE:GS) and Pfizer (NYSE:PFE), both of which dropped more than 1% Tuesday.


Goldman Sachs was just one of several big U.S. banks that face the specter of tougher regulation, with various regulators looking to impose a higher 5% minimum capital requirement on Goldman and seven other lenders. Proponents argue that having systemically important institutions maintain higher levels of capital could help prevent a future financial crisis. But the cost of the new requirement is less leverage for Goldman Sachs, and that in turn could hurt its ability to produce stronger profit growth in the future. The move is just the latest in the series of challenges that Goldman Sachs will have to overcome in order to catch up to its pre-crisis growth prospects, and in particular, Goldman's unique reputation as a Wall Street institution leaves it vulnerable to onerous restrictions that will nevertheless command popular appeal among those who blame the institution for the financial crisis. Given the stock's high price, Goldman also has a big influence on the Dow Jones Industrial Average, and that could make it harder for the Dow to rebound.

Pfizer's decline came on the heels of an even larger drop Monday, but today, the drug giant had to deal with a study that found that customers who used Viagra had a greater likelihood of developing melanoma. The study, which was published in a prestigious medical journal, found no link between Viagra and other types of skin cancer, and researchers emphasized that this early stage study is far from conclusive on the issue. Yet the researchers tried to control for different factors, including sun exposure and family history, and nevertheless found an 84% greater likelihood of developing melanoma. It's far too early to assess potential legal liability even if the study is confirmed, but bad news for one of Pfizer's most famous drugs reflects negatively on the company in many people's eyes.

Looking forward, the Dow Jones Industrials will have to keep getting good news in order to rebuild what had looked like momentum for a record-setting run. Unless that happens soon, some short-term traders will see the failure of the Dow Jones Industrials to reach new all-time highs as a sign of market weakness. That could make the Dow's recent pullback look tiny by comparison.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs. Try any of our Foolish newsletter services free for 30 days. 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.

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.

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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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