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Dow Continues to Fall Alongside Investor Sentiment

By Jessica Alling - Apr 22, 2013 at 12:00PM

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Without much help from its component stocks' earnings, the index is in a downward spiral.

Though some expected the Dow Jones Industrial Average (^DJI 1.61%) to regain some momentum this morning, its higher open was quickly lost following some unexpected economic news. With investor confidence continuing to wane, the index is in need of positive earnings news from its components -- more aid that went undelivered this morning. With losses piling up, the Dow has little help in its efforts to reach higher still.

Existing-home sales were expected to rise to a seasonally adjusted annual rate of 5.01 million units, but instead investors received the news that sales fell 0.6% in March. This is despite the continued strength in the rebounding housing market, which is one of the only drivers keeping the U.S. economy afloat. Though the decline in sales is not a promising turn of events, home prices did rise during March, giving support to the continuation of the recovery. The increase is largely due to decreased inventory of existing homes, which can help sellers raise prices but hurt overall sales figures.

Earnings
Caterpillar (CAT 1.76%) announced disappointing, though not entirely unexpected, earnings this morning. Largely due to a slowdown in demand of heavy machinery from mining customers, the company had a 17% drop in sales for the first quarter. The decline in sales resulted in profits that were nearly half those of the year-ago quarter -- $880 million versus 2012's $1.59 billion. Caterpillar revised its 2013 outlook to the lower end of its previous guidance, $7 per share on sales of $57 billion to $61 billion, with CEO Doug Oberhelman stating that the revision represents a 50% cut in sales due to the decline in mining customer demand. The company will begin a share buyback program that it shelved for five years, with up to $3.7 billion in shares on the table before the end of 2015.

In other news
With only six components in positive territory as of 11 a.m. EDT, the Dow has had little help in any effort to make up for its losses from last week. But Microsoft (MSFT 1.29%) is leading the charge, up 3.95% so far in trading. With a new effort geared toward customers wary of vague privacy policies and disclosure practices, Mr. Softy has rereleased a new commercial highlighting the potential threat to consumers who inadvertantly let private information go public. The new spot delivers several scenarios, while providing insight into how the company's beefed-up policies will protect you while using Internet Explorer. In its latest bid to drive customers away from Google (GOOGL 1.88%), Microsoft is taking a less direct approach than its "Scroogled" campaigns. With Google having recently been forced to change its policies as the result of a European investigation, now may be the time for Microsoft to up the ante.

Boeing (BA 4.64%) is one of the Dow's biggest losers this morning, even after the company announced progress on its Dreamliner fleet's return to service. The airliner manufacturer announced that the fleet is being fitted with modification kits that have been tested by Boeing and approved by the FAA after 100,000 hours of such testing. Engineers and technicians have been deployed across the globe to begin the fittings, with the installations taking about five days. In theory, the planes could take to the skies in a week, but there's no clear sign of the timing expected. So far the news hasn't inspired investors, with the stock down 1.14% so far this morning.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,637.19 (1.61%) $516.91
The Boeing Company Stock Quote
The Boeing Company
BA
$127.73 (4.64%) $5.67
Caterpillar Inc. Stock Quote
Caterpillar Inc.
CAT
$212.99 (1.76%) $3.68
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,155.85 (1.88%) $39.75
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$265.90 (1.29%) $3.38

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

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