AT&T Stock Is Holding Back the Dow

The Dow Jones Industrial Average (^DJI 0.56%) is basically flat after slightly better than expected unemployment claims data. AT&T (T 1.10%) stock is holding back the Dow, though, after a hedge fund manager said that investors should be wary of the stock. As of 1:15 p.m. EDT, the Dow was up 20 points to 15,125. The S&P 500 (^GSPC -0.88%) was down two points to 1,630.

There was one U.S. economic release today.

Source: MarketWatch U.S. Economic Calendar.

Weekly new unemployment claims fell 4,000 from last week to hit their lowest level since 2008. Analysts had expected a slight rise to 335,000. The drop brings the less volatile four-week moving average down 6,250 to 336,750 -- the lowest level since 2007 and 30,000 less than last year's average of 360,000-370,000. Fewer unemployment claims signals a strengthening job market, which is welcome news as recent data have shown the economy slowing.

Despite the good news, the market is down today as numerous stocks are down. Leading the way down is AT&T, down 1.30% to $37.34 after it was negatively talked about at the Ira Sohn Conference, which is an event for charity where investors donate to attend to hear notable investors present investment ideas. After the market closed yesterday, Jonathan Jacobson of Highfields Capital Management presented. Highfields is a "value-oriented investment management firm which manages private investment funds" for institutional investors; the firm has over $11 billion in assets under management. Jacobson pitched a short idea, Digital Realty Trust, which is down 5% today. This was his first short idea presentation since he pitched that investors short Enron.

Jacobson also noted that investors are stretching for yield and overpaying for high-yield dividend stocks. This can be seen as yesterday the Barclays U.S. Corporate High Yield index fell to a low 4.96%. He told investors that not all dividends are the same and to be wary of AT&T. He warned that the company's wireline business is a "melting ice cube" and that the wireless business is becoming more competitive.

AT&T stock has struggling a bit, up 10% this year versus a 15% gain for the Dow. In its wireless segment, the company is facing tough competition from a variety of players. The tough competition showed in AT&T's results this past quarter. AT&T lost 69,000 subscribers and missed on revenue expectations, which fell 1%. Verizon (VZ 0.90%), through Verizon Wireless, has been taking market share and wants to use its good results to buy out Vodafone's 45% stake in Verizon Wireless. T-Mobile USA also appears to be getting stronger as it tries to merge with MetroPCS and tries out a new pricing strategy that it hopes will help it take market share. New entrants also appear to be trying to get into the wireless game with DISH Network and Softbank bidding for Sprint (S).