The Dow Jones Industrial Average (DJINDICES:^DJI) is rebounding slightly after dropping for three days straight. Nike (NYSE:NKE) and Caterpillar (NYSE:CAT) are leading the Dow's rebound, gaining 3% and 1.8%, respectively, as of 1:20 p.m. EDT. The S&P 500 (SNPINDEX:^GSPC), meanwhile, has gained 0.49%.

Nike leads the Dow today after an analyst at Stifel Nicolaus upgraded the stock from "hold" to "buy" and set a price target of $87. Nike's stock has fallen 9% over the past month after the company reported earnings that missed investors' expectations. The Stifel Nicolaus analyst believes this is a buying opportunity, saying, "Standout fundamentals in combination with correction in both the consensus numbers and relative multiple leave us more constructive on the risk/reward for NIKE shares."


While others agree Nike's drop is a buying opportunity, I'm not so sure. The stock currently trades at a price-to-earnings ratio of 24.5 -- high for a stock that missed expectations and is only expected to grow its earnings 10% this year. Stifel Nicolaus' target price is calculated as 22.5 times estimated 2016 earnings, which is a ridiculous way to value a stock. While the company is still constantly innovating, I don't recommend that investors "Just do it" at this price. If you're looking for an investment in the sports apparel sector, there are better opportunities among smaller footwear makers.

The No. 2 Dow stock today is Caterpillar. Caterpillar has been in the news recently after the company had to defend its offshore tax strategies before the U.S. Senate last week. Similar to Apple last year, the company was berated by congressmen for how much of its profit the company moves overseas. Just like Apple, however, the company believes it is in line with the letter of the law and put the burden back on representatives to end the absurd tax code that companies now face. While politicians like the idea of tax reform, making it a reality is still politically unpalatable, which is why Rep. Dave Camp's tax reform plan seems dead in the water.

Today, the stock appears to be benefiting from a rise in emerging stock markets pulling up stocks with large foreign operations. I would continue to be hesitant of owning Caterpillar, as the company is heavily exposed to China and emerging markets whose economies will likely get worse before they get better. China in particular is experiencing a massive credit bubble and has propped up its economy on wasteful infrastructure spending, which, once it ends, will be felt by commodity companies around the world. The construction and mining sectors contain Caterpillar's main customers, so Caterpillar will be affected. I would avoid investing in Caterpillar right now; likewise, noted short-seller Jim Chanos remains short Caterpillar for the reasons outlined above.

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Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of 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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