The Dow Jones Industrials (DJINDICES: ^DJI ) have plenty of technology stocks among their ranks. But the one that mattered Thursday morning isn't among them -- at least not for now -- and so the Dow didn't benefit from the tech surge. In fact, as of 11 a.m. EDT, the Dow was down nine points, as conflicting quarterly reports from Caterpillar (NYSE: CAT ) and Verizon (NYSE: VZ ) showed the deep divide between stronger and weaker sectors of the economy and their earnings-growth prospects.
On the positive side, Caterpillar led the the Dow Jones gainers with a nearly 3% advance. The heavy-equipment maker saw first-quarter profit rise by 5% from the year-ago quarter, and Caterpillar also raised its forecast for full-year 2014 profit by $0.25 per share to $6.10, which is about 7% higher than investors had expected before the announcement. Flat revenue also beat expectations. Of even more importance is the improving sentiment for the construction side of the business, in both the U.S. and China, as more builders are purchasing equipment. Still, one struggle for Caterpillar continues to come from the mining-equipment segment, in which low commodities prices still have mining-company customers reluctant to make large capital expenditures at a time when cost-cutting measures are paramount to sustain margins. Yet if construction and infrastructure activity can pick up the slack, Caterpillar has plenty of room to recover from its relative underperformance in recent years.
Verizon led the Dow's decliners with a nearly 2% drop. Revenue jumped 5%, and earnings rose as a consequence of the completion of its takeover of its Verizon Wireless segment. Verizon also managed to add 539,000 new monthly subscribers as it worked hard to avoid the line of fire in a battle over pricing that has largely involved infighting among its main competitors. However, those subscriber-growth numbers were weaker than what Verizon's telecom archrival and fellow Dow component announced earlier this week, which was the first time Verizon has lost the lead in almost four years. Nevertheless, strength in Verizon's FiOS high-speed Internet service was an encouraging sign that the company is working hard to go beyond wireless devices and provide whole-home services for its customers. As the industry becomes increasingly competitive, it'll be more important for Verizon to establish and build on customer relationships to milk the most profit from each subscriber.
Earnings season is far from over, but stories like Caterpillar's and Verizon's already give much different pictures of what is happening with the economy. It'll be interesting to see as earnings season winds down how the Dow reacts once day-to-day news returns to topics with broader impact on the stock market as a whole.
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