Why Intel Will Move the Dow Tomorrow

The Dow Jones Industrials (DJINDICES: ^DJI  )  on Tuesday gave up a triple-digit morning gain to fall 78 points into the red as of 12:30 p.m. EDT. Although positive earnings reports from Dow components initially lifted the index, positive sentiment gave way to fears about the sustainability of the rally. This afternoon, Intel (NASDAQ: INTC  ) will take its turn at releasing earnings, and what the tech giant says will have ramifications not just for itself and fellow Dow component Microsoft (NASDAQ: MSFT  ) but also the blue-chip stocks more broadly.

Intel will release its earnings after the close of trading this afternoon, with past releases coming just minutes after 4 p.m. EDT. The chipmaker has scheduled a conference call for 5 p.m. EDT.

Source: Intel Free Press, Flickr.

Intel has faced the huge challenge of determining a path forward to make the most of its leadership position. For decades, Intel and Microsoft shared supremacy of the PC market, with Intel processors driving Microsoft software and commanding the business world. Now, PC demand is in decline, and even though emerging-market opportunities still exist for the PC segment, Intel will have to find other ways to make money in order to keep growing.

Intel is following two strategies in an effort to build up its competitive position. On one hand, Intel has built a solid game plan for its mobile-chip business, with a wide spectrum of products that offers viable choices at both the high-end and low-end of the market. With an emphasis on higher-performance tablets that can run Windows operating systems and Windows-based software, Intel is trying to find a niche among business customers, but it is also looking to offer low-cost alternatives for emerging-market-targeted devices where price is the key consideration.

Source: Intel.

Intel's other option is to encourage technology innovation that leapfrogs traditional mobile devices. The budding wearable-technology sector is one such opportunity, with Intel working hard to pioneer new advances that could make existing devices obsolete. If Intel can help create replacements for regular smartphones and tablets, it could leave its competitors in the awkward position of having spent billions in research and development on obsolete technology.

Investors in the Dow Jones Industrials will watch Intel's earnings results very closely. Tech stocks have played a vital role in the five-year bull market, and although the recent weakness in the Nasdaq Composite comes more from high-flying biotechnology and social-media stocks than from old-school tech companies like Intel, many investors would like to see a bounce in tech stocks in order to gain confidence about future market gains. If Intel can give investors the positive results they want, it could lead to a new leg up for the bull market.

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