With initial jobless claims rising again last week up to 388,000 -- an increase of more than 46,000 claims from the prior week -- the Dow Jones Industrial Average (DJINDICES:^DJI) is bouncing up and down this morning. As of 12:55 p.m. EDT the index is flat, down less than a point on a topsy-turvy day of trading. Only 10 of the Dow's 30 components are in the red thus far, but with the way things are going, that could all change very quickly today.
So why are they down?
American Express is down more than 2.46% today. The company announced earnings this morning, and while the company hit analysts estimates, management stated that an unbalanced global economy has caused consumers to reduce credit card spending. American Express has recently inked a deal with retail giant Wal-Mart to push its Bluebird prepaid debit cards. Many investors believe this deal will be lucrative for both organizations, but that will only materialize if consumers' confidence increases and they start spending again.
When a credit card company says consumers aren't spending on the same day a jump in unemployment claims hit the markets, consumer goods companies are likely to fall. And that's what is happening today. Wal-Mart, Coke, and Procter & Gamble are all directly tied to the consumer. Pepsico announced earnings yesterday which indicated that the American soft-drink market is shrinking, and whether that's due to health concerns or just a cutback in spending, that's not something Coke shareholders want to hear.
Procter & Gamble has built a number of billion-dollar brands, but when things get tight for consumers, spending a few dollars more on name-brand items doesn't rank high on the to-do list. Wal-Mart is lower by 0.47%, while Coke and Procter & Gamble are down 0.3% and 0.1%, respectively.
Matt Thalman has no positions in the stocks mentioned above. The Motley Fool has the following options: short OCT 2012 $55.00 puts on American Express Company, short OCT 2012 $60.00 calls on American Express Company, and long OCT 2012 $65.00 calls on American Express Company. Motley Fool newsletter services recommend American Express Company, The Coca-Cola Company, and The Procter & Gamble Company. 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.