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Caterpillar Can't Save the Dow

By Jeremy Bowman – Updated Nov 17, 2016 at 4:27PM

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After six straight days of gains, the Dow finally pulled back slightly.

You can't win 'em all, as they say. After six straight days of gains, and wins in 11 of the last 12 trading sessions, the Dow Jones Industrial Average (^DJI -0.56%) finally gave back some ground today, falling 14 points, or 0.1%.

Pending home sales were well off estimates, dropping 4.3% in December, whereas economists had expected no change from November. While housing prices have been rising, the drop in transactions indicates supply may be drying up, which could spur further construction. December's figure was still 6.9% higher than a year ago, and the overall trend in housing remains favorable. Homebuilder stocks, including Toll Brothers (TOL 0.92%), Lennar, and KB Homes (KBH 1.98%), were down 1% to 3%.

Orders for durable goods, however, showed a strong increase, rising 4.6% instead of the 1.6% the market expected. Factoring out the transportation sector, orders only rose 1.3%, but that was still above estimates. The figure was especially promising, considering that fears of the fiscal cliff had cooled off other areas of the economy such as retail.

Caterpillar (CAT -0.30%), a major manufacturer of durable goods, was the only Dow component to report earnings today. Earnings per share dropped 55% from $2.32 a year ago to $1.04 because of accounting fraud in a Chinese company it had acquired and also a general slowdown in China and other key markets. Factoring out the accounting-related writedown, the company had an adjusted profit of $1.91, ahead of analyst estimates of $1.70. Revenue fell 7% during the quarter, and the earth-moving equipment maker expressed cautious optimism about 2013 as the U.S. housing sector improves and conditions in China look up. It projected 2013 EPS of $7 to $9 a share, while the analyst consensus is at $8.54. Caterpillar gained 2% on the day, leading Dow stocks.

In other stocks reporting earnings today, Seagate Technologies (STX) was down 4.4% in after-hours trading. The disk-drive maker beat top- and bottom-line estimates, posting adjusted EPS of $1.38 a share and revenue of $3.7 billion. However, its revenue outlook for the current quarter at $3.2 billion to $3.4 billion missed expectations, driving the stock down.

For more earnings analysis on Caterpillar or Seagate, I recommend picking up a copy of our new ticker reports. These synopses provide a detailed 2,000-word analysis on your stocks to help you better understand the key factors driving the companies. They take an in-depth look at companies' opportunities and risks and come with free updates to break down earnings reports and other important news.

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Jeremy Bowman has no position in any stocks mentioned, and neither does The Motley Fool. 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.

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$34,395.01 (-0.56%) $-194.76
Caterpillar Stock Quote
$235.69 (-0.30%) $0.72
Seagate Technology Stock Quote
Seagate Technology
Toll Brothers Stock Quote
Toll Brothers
$48.35 (0.92%) $0.44
KB Home Stock Quote
KB Home
$32.01 (1.98%) $0.62

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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