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Why Disney's Holding Back the Dow

By Dan Caplinger – May 8, 2013 at 11:00AM

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The broader market is mixed on another slow news day.

The stock market remained in its recent holding pattern today, with the S&P 500 (^GSPC 1.42%) rising to a new record while the Dow Jones Industrials (^DJI 1.00%) was up just a single point shortly after 10:45 a.m. EDT. Ever since May began, many analysts have looked for a pullback in light of the big runs higher that the Dow and S&P 500 have made recently, yet even the smallest declines seem inevitably answered with more buying interest. Today's excuse for keeping markets high came from China, where favorable trade numbers in April reversed a rare trade deficit from the previous month. Certainly, a lack of bad news on the global front has helped make U.S. investors more confident about future prospects.

But holding back the Dow was Disney (DIS 2.16%), which fell almost 2% after releasing earnings last night. It's hard to understand the decline in light of the company's results, which featured a 32% jump in net income and better-than-expected earnings per share that came from a 10% jump in revenue. With the company's theme park, movie studio, and TV networks businesses all providing solid growth, Disney appears to be firing on all cylinders. Yet with the stock having set new all-time highs throughout the past several months, short-term moves often reflect traders' positions rather than long-term fundamentals.

In addition, unexpected surprises caused some big moves. Fusion-io (FIO.DL) lost a quarter of its value after co-founders Rick White and CEO David Flynn left the company to start another venture. In a strong stock market, there's always a threat that top talent will get lured elsewhere, and although Fusion-io quickly named a new CEO, the question remains whether the enterprise data-storage company can continue moving forward with the same enthusiasm under new leadership.

Finally, Whole Foods Market (WFM) posted a better than 10% gain after beating expectations in its quarterly report. The grocer saw its net income jump 20% as Whole Foods managed to keep its profit margins high even in the face of a tough competitive environment. Investors also responded favorably to the company's decision to split its stock two-for-one, which is a typical reaction to splits even though they have no fundamental impact on share value.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Walt Disney and Whole Foods Market. The Motley Fool owns shares of Walt Disney and Whole Foods Market. 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.

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