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All Eyes on Alcoa as the Dow Kicks Off Earnings Season

By Dan Carroll - Apr 8, 2013 at 2:33PM

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The blue-chip index stalls as investors stay cautious ahead of Alcoa's quarterly report.

Earnings season is back, with weeks of quarterly reports on tap for Wall Street to pick apart and analyze. So far, however, the Dow Jones Industrial Average (^DJI 1.98%) is taking a cautious approach to the start of the season: As of 2:20 p.m. EDT, the blue-chip index sits a hair below breakeven. Few Dow members are moving far today, and the first company on the index to report -- aluminum producer Alcoa (AA), which releases earnings after the closing bell today -- has barely budged. Let's get caught up on which way the Dow's Monday is headed.

Eyes turn to earnings
Alcoa's on tap for its earnings call this afternoon, but many analysts aren't expecting much from a company that's been hit hard by sluggish economic growth around the world. The stock has slumped considerably in 2013, ranking among the worst Dow members in year-to-date performance as aluminum prices remain under pressure and China's slowdown hurts the company's growth prospects. Alcoa's gains of 0.9% today won't impress anyone, and all eyes are set on the coming earnings report. Analysts expect falling revenue and uninspiring EPS figures.

Other stocks around the Dow are having better days, although no member of the index has lit up investors' portfolios so far. Two big retail names are headed higher: Home Depot (HD -0.40%) and Wal-Mart rank near the top of the Dow with respective gains of 1% and 1.3%. Neither company reports earnings this week, but these firms comprise a tale of two economies. Wal-Mart's been hampered by tightening consumer spending and the expansion of the payroll tax; the company's guidance for this quarter didn't strike a chord with many industry observers when announced back in February.

Home Depot, meanwhile, is looking to capitalize on a housing market that's primed to explode as the U.S. population keeps increasing. The stock has jumped more than 10% since the start of 2013, and if home sales pick up the pace, Home Depot will be in the driver's seat of the Dow.

Elsewhere, Disney's (DIS 3.33%) another leader of the Dow today, up 1.2%. The stock has hit a new all-time high today, even as reports circulate that the company's planning a round of layoffs in its studio and consumer products divisions. Disney announced last week that game developer LucasArts, which Disney acquired when it bought LucasFilm, will be shut down. Layoffs elsewhere in the company wouldn't be a stretch if Disney is looking to slash costs and consolidate -- a smart move, considering the giant acquisitions of Marvel and LucasFilm in the recent past.

On the other side of the Dow today, Johnson & Johnson (JNJ 1.39%) is leading the index lower, down 1.3%. JPMorgan downgraded the stock to "neutral" from "overweight" today, sparking the sell-off. Despite that move, however, J&J remains one of the broadest and most diverse companies in the health care sector. Its 15.8% run-up since the start of 2013 gives room for pause, but in the long term, Johnson & Johnson's reach across pharmaceuticals, medical devices, consumer products, and other health care fields makes it a stable, safe pick for investors who are in it for the long haul.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$31,880.24 (1.98%) $618.34
Johnson & Johnson Stock Quote
Johnson & Johnson
$179.44 (1.39%) $2.46
The Walt Disney Company Stock Quote
The Walt Disney Company
$105.83 (3.33%) $3.41
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$286.03 (-0.40%) $-1.16
Alcoa Inc. Stock Quote
Alcoa Inc.

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

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