The Dow Suffers on Retail and Fed Fears, but Disney and Procter & Gamble Eke Out Gains

Between poor retail results and concerns about future interest rate increases, the Dow fell sharply. Find out why these two stocks held strong.

May 20, 2014 at 9:05PM

The Dow Jones Industrials (DJINDICES:^DJI) fell almost 138 points on Tuesday, reacting to poor results from the retail sector as well as comments from Federal Reserve officials about the future course of interest rates. After comments from certain officials earlier this week suggesting that interest rate increases could take longer to occur than many expected, today's warning from Philadelphia Fed President Charles Plosser that a stronger economy could require quick rate hikes took some of the enthusiasm away from market participants. Even as stocks tumbled, though, Dow components Disney (NYSE:DIS) and Procter & Gamble (NYSE:PG) posted small gains and helped keep losses for the Dow Jones Industrials from being even worse.

Source: Procter & Gamble.


Source: Disney.

Disney's gain of just 0.05% was minimal, but it shows how the entertainment giant is in a dominant position even as content distribution companies seek to consolidate and strengthen their bargaining power. Arguably, the combinations of cable companies, traditional telecom companies, and satellite-video providers could pose a threat to content providers like Disney. But already, Disney has taken steps to wean itself away from overreliance on cable, reaching out to streaming-video specialists and concentrating on making its content indispensable. By demonstrating its forward-thinking ability, Disney is in a strong position to avoid what might otherwise be a painfully disruptive change in the industry.

Procter & Gamble, meanwhile, climbed 0.4%. The consumer-products giant is generally seen as a stalwart defensive name that's able to hold up well even when the broader market declines. Still, Procter & Gamble isn't without risk, and if Federal Reserve threats to raise interest rates sooner rather than later actually come to pass, then they could lead to a strengthening dollar. Adverse foreign-currency impacts have hit a number of stocks in the Dow Jones Industrials, but with Procter & Gamble doing business in the vast majority of countries across the globe, it gets hit particularly hard when a strong dollar makes the foreign currency it collects worth less in dollar terms. Moreover, with a forward earnings multiple of nearly 18, Procter & Gamble doesn't have nearly as much margin for error as you'd expect from a conservative stock.

Investors in the Dow are likely to remain nervous about the state of the economy and the sustainability of the bull market in stocks for the foreseeable future, especially if recent turbulence in the market continues. Smart investors are already looking to see whether stocks like Disney and Procter & Gamble can provide protection in the event that the Dow Jones Industrials decline further in the days and weeks to come.

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Dan Caplinger owns shares of Walt Disney. The Motley Fool recommends Procter & Gamble and Walt Disney and owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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