Earlier this week the Federal Reserve announced that it would keep long-term interest rates low either until unemployment falls below 6.5% or until inflation grows higher than 2.5%. This morning the Consumer Price Index -- which tracks the price of goods and services and is published by the U.S. Department of Labor -- fell for the first time since May. The CPI declined by 0.3% in November -- a steeper drop than the consensus estimate of -0.2%. This follows October's decline of 0.1%.
So with that news, investors can sit tight while the central bank continues its debt purchase program; we know inflation is in check, and it would take a near-miracle to get the unemployment rate below 6.5% anytime soon. But as a whole, the Dow Jones Industrial Average (^DJI 0.67%) does not seemed to be affected by the lower CPI numbers today. As of 1 p.m. EST, the Dow is down about eight points, or 0.06%. Currently, 16 of the Dow's 30 components are trading in the red. Three of the losers are Home Depot (HD 0.22%), United Technologies (RTX), and Pfizer (PFE 1.00%).
So why are they down?
Shares of Home Depot are down 0.6% today. Contracting CPI numbers may indicate that some retailers' margins will narrow as they reduce prices to remain competitive. But not all retailers will fell the margin squeeze as much as Home Depot. For example, Dow component Wal-Mart (WMT 1.02%), which is currently up 0.25%, already operates with low margins, compensating with high volume to turn large profits. Because many items at the Home Depot are one-time purchases, the company needs bigger margins in order to stay profitable.
Shares of United Technology have been bouncing between positive and negative all day as investors take in the updated earnings guidance the company announced yesterday. While the company believes profit will rise by 13% in 2013, the projected earnings of $5.85 to $6.15 per share have a midpoint below the $6.12 analysts were expecting. Additionally, the company believes revenue will fall between $64 and $65 billion, while the analyst consensus for 2013 was $66.4 billion.
Share of Pfizer are down more than 0.3% this afternoon. News broke this morning that it plans to take its animal health unit, Zoetic, public sometime in early 2013. Pfizer would like to raise about $4 billion in the offering. Sources told The Wall Street Journal that a final decision on the IPO would depend on market conditions, but since the company announced that it was planning to spin the animal health unit off back in June, many believe that whether the unit goes public or not, it will not remain a part of Pfizer for the full 2013 calendar.
