American Express' Surge Pushes the Dow Higher

IBM's stock tumbles on renewed concerns from China.

May 27, 2014 at 2:30PM
Daily Fool

The market's kept up its recent momentum today, with the Dow Jones Industrial Average (DJINDICES:^DJI) closing in on another record high after gaining more than 65 points as of 2:30 p.m. EDT. Despite the gain, most stocks on the Dow aren't moving substantially today, but American Express (NYSE:AXP)has jumped more than 2.8% to lead the index. Things aren't looking so strong for IBM (NYSE:IBM) investors today, as the tech stock has shed 0.8% to fall to the bottom of the Dow. Let's catch up on what you need to know.

American Express poised for a rebound?


Source: Wikimedia Commons

American Express' steep rise comes after Morgan Stanley analyst Betsy Graseck issued a strong statement in favor of the stock. Graseck indicated that the credit card giant is poised to see its earnings and revenue climb as U.S. retail spending rises in the wake of the cold winter. American Express' stock has fallen more than 1% over the last three months, but there's still plenty to like about this pick.

The company stayed on track despite the winter hardships on consumers, with all four of its major operating segments reporting year-over-year revenue increases in the last quarter. In particular, American Express' U.S. card services branch reported noninterest revenue growth of nearly 5% in its most recent quarter. If consumer spending does pick up more strongly in the next quarter, look for this stock to ride higher growth to a turnaround on the market.

IBM's stock, meanwhile, has plunged more than 10% over the past year as investors have soured on disappointing earnings and a concerning growth outlook. Today hasn't helped that picture: Sources told Bloomberg that China is looking at the possibility of removing IBM servers from its banks and other financial institutions in the wake of U.S. spying allegations. While IBM denied any knowledge of the matter in an email statement cited by Bloomberg, Beijing already announced recently that it plans to vet tech companies -- and any serious move to push IBM servers out of Chinese banks could be a huge blow to the company's foreign initiatives.

IBM has struggled in emerging markets. The company's sales in such economies plunged by 11% in its most recent quarter, with Asia-Pacific revenue overall falling 12%. Decreasing demand in China for servers and other hardware equipment has been a big part of that situation, even though the Chinese market only accounts for about 5% of the company's overall sales. Still, the world's second-largest economy holds huge potential for the tech world. and if Beijing grows more aggressive in pushing its domestic tech brands over international rivals, IBM and other growth-starved companies could be in for serious trouble in the near future.

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Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends American Express. The Motley Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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