The Dow Jumps on Economic Strength as Ford, General Motors React to Auto Sales Numbers

The Dow Jones Industrials (DJINDICES: ^DJI  )  had climbed more than 121 points as of 11 a.m. EDT Tuesday, once again sitting near the all-time closing high set last month. Market participants pointed to encouraging economic data, with key measures of manufacturing and factory activity continuing to show ongoing growth. Followin a dramatic drop in economic activity during the winter-hit first quarter, investors are looking for confirmation that the economy bounced back in the spring, and today's numbers support that theory. Auto sales are also an important component of economic growth, and both General Motors (NYSE: GM  ) and Ford (NYSE: F  ) reported June sales figures this morning.

Source: General Motors.

The surprising news at GM was that sales climbed in June, with a 1% jump coming despite the fact that the auto giant has been in the news repeatedly for safety-related recalls. With almost 29 million vehicles subject to recall efforts just so far this year, General Motors has had to deal with negative publicity stemming from failures to remedy known defects as quickly as possible. Auto analysts believed that General Motors would likely see a big drop in sales last month, with consensus figures calling for a loss of about 8.5%. Nevertheless, GM sold about 267,000 vehicles, with the Buick make providing a substantial part of the company's overall sales lift. Some investors believe that the fallout from vehicle recalls might turn out not to be as huge as initially expected. Shareholders enjoyed a 2% rise in General Motors' stock on the news.

Source: Ford.

Ford, meanwhile, fell slightly after reporting a drop in June auto sales. The company sold about 222,000 vehicles, down about 5.8% but still faring better than investors had expected. A 14% year-over-year overall sales gain in the Fusion model helped salvage the month for Ford, and the Focus also did well. Yet sales of F-Series trucks dropped 11%, while the popular Escape saw sales fall by a double-digit percentage as well. Still, the key for Ford's long-term success rests in efforts to refresh some of its biggest model lines, with the new 2015 F-150 holding huge promise for the automaker given the dominance of the F-Series in the past.

The Dow Jones Industrials no longer include either General Motors or Ford, but auto sales still make up a key component of the Dow's long-term success. Dow investors should keep an eye on Ford and GM to make sure they sustain their strength even as the economic recovery ages.

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  • Report this Comment On July 01, 2014, at 11:36 AM, systemBuilder wrote:

    We were in China June 15-20, 2014, and were surprised to see so many Buicks on the road - among 6 major cities (Beijing, Nanjing, Xian, Sujou, Guangjou, Shanghai), this was the top american car. Chevrolet does not launch until later this year, when a new "Transformers" movie will be released, sponsored exclusively by Chevrolet, according to China Daily, ~June 27, 2014.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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