Here's Why the Dow Jones Couldn't Claw Its Way Back to Gains Today

Is it time to fear the rate hike already?

Jun 26, 2014 at 4:46PM

After starting Thursday more than 100 points in the red, the Dow Jones Industrial Average (DJINDICES:^DJI) spent much of the day climbing back toward breakeven. Unfortunately, it ended with a loss of 0.2%, despite an early afternoon bounce from lows as markets began to move past fears that the Federal Reserve would begin its inevitable rate hikes earlier than anticipated.


St. Louis Fed President James Bullard warned investors on Maria Bartiromo's morning Fox Business program that the Fed might raise rates as soon as the first quarter of 2014, and he also expects inflation to move at a 2%-plus pace through 2015. Because investors have long lived in fear of a rate hike drawing interest away from stocks -- which are the best option for returns until bonds resume yielding more than many dividend payouts -- this warning was more ominous than far-worse news yesterday of a record non-recessionary plunge in GDP.

While nearly every Dow stock was down in early trading, five components have since clawed back to gains of at least 0.1%, and another three are effectively trading at breakeven on the day. The day's clear Dow leader was Boeing (NYSE:BA), which rose 0.7% on news out of Kazakhstan that it would soon roll out a new commercial jet to replace its long-discontinued 757 model.

Kazakhstan's Air Asana expressed interest in buying a medium-sized medium-range jetliner that could carry about 180 passengers, a configuration that would fill the gap between the smaller 737, which commonly carries about 120 passengers but has been modified  to carry up to 215, and the new 787, which can seat between 210 and 335 passengers depending on configuration. Boeing ceased production of the 757 in 2004, and its role has largely been supplanted by Boeing's 737-900ER, which has been in production since 2006. On balance, this news seems rather meaningless -- Air Asana and other airlines already have options to replace their aging 757s. However, interest in new orders is always a net positive for Boeing.

While no Dow component moved in excess of 1% in either direction, there was still plenty of volatility to be found among the S&P 500's (SNPINDEX:^GSPC) more varied components.

Leading the way were shares of Iron Mountain (NYSE:IRM), which popped 20% after the company gained IRS approval to convert itself to a real estate investment trust. Iron Mountain's stock had already offered a yield in excess of 3.6% before its REIT conversion was approved, but the company's free cash flow payout ratio had also already been hovering well above 100% for more than a year. This indicates that there may not be a whole lot of additional yield to be found in this conversion. No other S&P stock moved by double digits in either direction.

IRM Chart

IRM data by YCharts.

On the other end of the scale, Bed Bath and Beyond (NASDAQ:BBBY) shareholders took another hit in what's been a rather miserable year, finishing with a 7.2% loss after dropping as far as 10% on its second-consecutive disappointing earnings report. The home-goods purveyor has become one of the year's worst stocks, as growth has apparently ceased; but while its shares are trading 30% lower in 2014, its forward P/E ratio is also at its lowest level in an entire decade:

BBBY Chart

BBBY data by YCharts

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Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

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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