The Dow Turns Positive as Boeing's Gain Outweighs Caterpillar's Pain

The Dow Jones Industrials (DJINDICES: ^DJI  ) climbed back from an early fall this morning, gaining about 20 points as of 12:30 p.m. EDT. Most investors focused almost entirely on the day's merger and acquisition news, with major announcements from key Dow components moving their shares substantially. But outside the M&A context, the tug-of-war among different members of the blue-chip index helps explain why the market has stayed in a relatively narrow range to start out the week. One such battle is playing out between two true industrial stocks: Boeing (NYSE: BA  ) and Caterpillar (NYSE: CAT  ) .


Source: Boeing.

On one hand, Boeing is up almost 1% today, as the aerospace giant continues to make headway in its growth efforts in the commercial aerospace arena. Over the weekend, Boeing made its first 787 Dreamliner aircraft delivery to Canada, with Air Canada planning to use the plane on flights between Toronto and Israel, as well as offering flights to Tokyo. Some investors are nervous about the possibility of a leadership change atop Boeing's executive team, especially as the Dow Jones Industrials component works hard to alleviate its huge order backlog by ramping up production on its most popular models. Meanwhile, reports have emerged that the European Union could reopen long-held trade disputes against Boeing because of state tax incentives that the aircraft maker received to keep production of its 777X in the Seattle area. That could be a big distraction for Boeing as it seeks to satisfy impatient customers and get actual production under way and running efficiently.

Source: Caterpillar.

On the other hand, Caterpillar fell almost 1% Monday, as prospects for the heavy-equipment maker aren't nearly as positive as conditions in the aerospace industry. Last week's troubling earnings report from one of Caterpillar's industry peers pointed to ongoing weakness in the construction-equipment industry, with news of only marginal growth providing stark contrast to Caterpillar's much-better first-quarter results. The issue might well hinge on whether Caterpillar's dealer network, which raised its inventory levels substantially during the first quarter, is successful in selling the equipment that it brought in front of its customers. Encouraging data in the U.S. pointing to an increase in multifamily homebuilding activity could well support Caterpillar's efforts, and commercial construction in North America could continue a healthy trend for the Dow's heavy-equipment giant. Yet weakness in the mining industry will likely persist as long as commodities prices remain low, and there are few signs of a recovery in commodities in the foreseeable future.

The tug-of-war between the true industrial companies in the Dow Jones Industrials is symptomatic of the broader stalemate that we've seen recently, as the Dow has fought to make even marginal forays into record territory. The different conditions affecting Boeing, Caterpillar, and other industrial stocks will continue to make investing in the index an unpredictable experience at best.

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