The Dow Falls As Caterpillar, AT&T Weigh Down the Market

The Dow Jones Industrials (DJINDICES: ^DJI  ) lost ground from the opening bell on Tuesday morning, as investors worried about earnings reports from the retail sector that pointed to some troubling trends with implications for the broader economy. As of 11 a.m. EDT, the Dow was down 30 points. Although one index component reporting earnings actually picked up ground on the day, the worry more broadly is that results from the tough winter quarter in many cases have come in even weaker than expected. Some stocks helped lead the Dow lower, with Caterpillar (NYSE: CAT  ) and AT&T (NYSE: T  ) among those with the sharpest declines.


Source: Caterpillar.

Caterpillar dropped more than 1% after the heavy-equipment maker once again posted discouraging retail sales figures for its most recent three-month period. Many focused on Caterpillar's headline numbers, which showed overall machine sales down 13% worldwide as of the end of April. But deeper in the Dow component's results is a big disparity across different divisions and geographical areas. In the construction segment, Caterpillar actually saw sales rise 6% worldwide, with every area except Europe-Africa-Middle East posting gains. In the resources segment, though, sales plunged by half. Also, the North American market continues to hold up well for the company, with a 12% gain in sales representing the only geographical area to do better than year-ago figures. In order for Caterpillar to maximize its potential, it needs to get the key Asia-Pacific region firing on all cylinders again. But strength domestically could help Caterpillar get through tough times even as shareholders have already started expressing their optimism.

Meanwhile, AT&T fell 1.2%, adding to the Dow component's declines from Monday after it announced its buyout bid for DIRECTV. Ever since fellow Dow Jones Industrials peer Verizon completed the full takeover of its Verizon Wireless division, investors have assumed AT&T would make a deal of its own in order to bolster its growth prospects. With the need for spectrum and the importance of video entertainment in the suite of telecom services that AT&T provides, choosing a satellite service provider makes sense in light of the trend toward consolidation in the cable industry. Yet the deal is fraught with uncertainty, as some analysts have questioned whether the satellite niche is the best way for AT&T to move forward. Moreover, regulators will face the increasing challenge of evaluating proposed tie-ups in the industry, as traditional lines of demarcation between certain subsectors of the telecom area are disappearing. With substantial new debt, AT&T will have to prove to investors that the deal makes sense and will produce true long-term growth.

Recent drops from all-time record levels aren't yet a big cause for concern for the Dow Jones Industrials. As long as declines such as Caterpillar's and AT&T's are short-lived, the Dow has every ability to push higher again.

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