Now that earnings season has officially begun, investors can buy and sell stocks based on earnings, margins, revenue increases, and other key financial metrics rather than on superficial news and fleeting events. Over the past few weeks, we've seen stocks trading based on rumors, passing positive or negative news, and, of course, any given day's fiscal cliff reports.
While most of the noise out there about stocks is just that -- noise -- investors do want to keep track of any negative events that could have long-term implications and may change their investing thesis. A few such events occurred this week, causing a number of the Dow Jones Industrial Average's (DJINDICES:^DJI) stocks to move more than normal. Let's first look at how the major stock indexes performed this week, and then we'll tackle what caused a few Dow stocks to fall lower over the past five trading days.
The Dow finished the week up 52 points, or 0.38%, and now sits at 13,488. After moving lower on Monday and Tuesday, it managed to post a three-day winning streak to end the week. The other two major U.S. indexes also turned in a winning week, as the S&P 500 (SNPINDEX:^GSPC) moved higher by 0.38%, or 5.58 points, and the Nasdaq (NASDAQINDEX:^IXIC) turned in the best performance, up 36 points, or 1.18%.
While last week the Dow had only one loser, nine of its components lost value during the past five trading days.
The big winners
Before I get to the week's big losers, I'd like to point out the big winner: For the second week in a row, it's Hewlett-Packard (NYSE:HPQ). By far the worst performing Dow stock in 2012, when it lost more than half its value, HP has risen more than 13% so far in 2013. But the good times may already be over, following a Thursday report that personal computer sales fell by 6.4% in the fourth quarter and ended 2012 down 7%. That marks the first time in five years that holiday PC sales fell. The last time the industry saw full-year sales numbers lower than this was 2001. On Friday, HP lost 0.74%, and I'd expect shares to continue falling as the coming week begins.
Other notable winners this week were Intel (NASDAQ:INTC) and American Express (NYSE:AXP), whose shares rose 3.38% and 3.3%, respectively. Intel probably moved in tandem with HP. While it continues to dominate the PC chip market, the company's reliance on PCs has held the stock back over the past year. American Express, meanwhile, rose after announcing plans to cut 5,400 jobs this year in its travel services units, whose revenues have fallen in recent years as customers move toward using online travel reservation systems.
The big losers
Earnings season officially kicked off after hours on Tuesday, when Alcoa (NYSE:AA) released its quarterly results. Shares lost 3.66% on the week, even though the company reported earnings per share of $0.06 -- in line with what analysts had expected -- and said it sees global demand for aluminum rising by 7% in 2013, beating a 6% increase in 2012.
Alcoa also said demand from the aerospace industry will increase by 10% this year. That kind of news might have helped Boeing (NYSE:BA) any other time, but the aircraft manufacturer had an awful week that saw its shares plunge by 3.07%, making it the week's third worst performing Dow stock. On Monday came news that one of its newest and highest-profile planes, the 787 Dreamliner, caught fire on the tarmac at Boston's Logan International Airport. On Tuesday, another 787 had an issue with a fuel leak. On Wednesday, there was a brake issue with a 787 in Japan. And on Friday, two 787s had problems -- one had a cracked cockpit window, and inspectors found an engine oil leak in another. Also on Friday, the Federal Aviation Administration announced that even though the 787 Dreamliner is believed to be a safe aircraft, the agency plans to take a close look at its design, parts, and manufacturing.
Finally, Bank of America (NYSE:BAC) lost 4.28% this week, making it the worst Dow performer following a host of bad news. Early in the week, the bank announced a number of settlements that will cost the bank more than $10 billion in fines and penalties relating to improper mortgage and foreclosure practices from before and after the financial crisis. While $10 billion is a huge number, some investors thought it could have been much higher and considered this week's news a win. But on Wednesday, an analyst from Credit Suisse downgraded the stock from "outperform" to "neutral," saying the price has moved ahead of itself too quickly. And finally, the stock took a hit after Wells Fargo's (NYSE:WFC) earnings report showed a drop in its net interest margin -- the spread between the interest rate banks are paying for deposits and the interest they receive for making long-term loans. Since Wells reported a decline, investors think it's likely that all the big banks will see their net interest margins fall.
Matt Thalman owns shares of Bank of America. Follow Matt on Twitter: @mthalman5513. The Motley Fool recommends American Express, Intel, and Wells Fargo and owns shares of Bank of America, Intel, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. 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.