Why the Dow Roared 158 Points Higher As J.C. Penney and Sears Lost Out

Disney helps the Dow bounce back from yesterday's triple-digit decline.

May 21, 2014 at 6:20PM
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The Dow Jones Industrial Average (DJINDICES:^DJI) erased yesterday's 137-point tumble on Wednesday, soaring higher after minutes from the Federal Reserve's April policy meeting were released. Comments from Philadelphia Fed President Charles Plosser on Tuesday raised concerns that the central bank was planning on raising interest rates sooner rather than later, but as today's sigh of relief attests, that doesn't seem to be the case. Walt Disney (NYSE:DIS), J.C. Penney (NYSE:JCP), and Sears Holdings (NASDAQ:SHLD) each garnered a lot of attention from Wall Street today -- a day that saw the Dow surge 158 points, or 1%, to end at 16,533.

Walt Disney finished as one of the Dow's top performers on Wednesday, adding 1.4%. Disney, like much of corporate America, stands to benefit if interest rates remain low, because it keeps the company's cost of capital down and makes money more accessible to its customers. And if money's easier to come by, why not raise prices? That's precisely what the entertainment giant did just days ago for Disneyland and Disney California Adventure Park, raising the cost of a one-day pass to both theme parks by nearly 10%, and a one-day pass to just one theme park by 4.3%.

Meanwhile J.C. Penney shares are in freefall mode for a third straight day today, slumping 3.7%, as investors continue to tame their jubilance. The words "J.C. Penney" and "jubilance" haven't seen much of each other in recent years as the department store did away with promotional sales and alienated much of its customer base. But with former CEO Myron Ullman back in charge once again, he's helped to stem much of the bleeding by simply returning to the old playbook. Shares jumped 16% last Friday after the company posted a narrower loss than Wall Street expected, while also boasting strong same-store sales growth. Those sorts of surprise results will be hard to replicate for other retailers this week.

Searsexterior

Sears is struggling in both the U.S. and Canada. Image source: Sears

Rival department store Sears Holdings, for instance, shouldn't expect to post massive gains after its quarterly earnings report tomorrow. Sears' stock, like J.C. Penney's, also lost 3.7% today as Sears Canada posted its largest revenue decrease in five years. Not only did sales fall 11% in the first quarter, but same-store sales, the most-watched metric in the world of retail, dropped 7.6%. This doesn't bode well for Sears, which announced last week that it was trying to sell its 51% stake in Sears Canada. Buyers, understandably, will be less enthusiastic given the recent declines.

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John Divine has options on J.C. Penney. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.

The Motley Fool recommends 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.

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