A brand-new all-time high from the Dow Jones Industrial Average (DJINDICES:^DJI) may be making some investors start to doubt the markets. Even with new economic news that would usually give the index a boost, the Dow has wavered back and forth between highs and lows, with it currently resting at a 24-point loss just before 11 a.m. EDT.
Good news all around
Jobless claims are at a five-year low for the second week in a row, with the rolling four-week average below pre-recession levels for the first time. As businesses hold on to current employees to manage workload, firings have dropped. And while this is good news for the labor market, there is still a need for hiring to pick up. As we've seen in other reports recently, employers are holding off on hiring until economic conditions improve.
Wholesale inventories rose in March thanks to vehicles and machinery. The overall improvement was 0.4%, higher than the expected 0.3%, with cars and machinery improving by 1.2% as retailers stocked up on inventory for higher sales turnout. The news bolsters the fact that the economy did improve during the first three months of the year, after some have noticed a slowdown in recent weeks.
Consumer comfort continues to improve as the recent Bloomberg index shows a near-five-year high. Wealthier Americans are enjoying the improving stock market and higher home prices, which leads to improved consumer spending to a degree. The lack of hiring in the labor market does put pressure on the other segments of the population, however, who continue to feel the results of higher taxes. With the middle- and lower-wage earners feeling the cuts in their paychecks, overall consumer spending will likely grow at a modest pace.
Sum of its parts
The Dow is struggling to maintain its new highs, but with the majority of its component stocks in the red, the index might have a bigger fight on its hands. Since the Dow is a weighted index, a select few stocks have a big influence on its movements. With only four of its top 10 weighted stocks in positive territory this morning, it may be difficult for the index to gain any momentum.
The biggest drag this morning is IBM (NYSE:IBM), down 0.8%. As the top stock in the index, its modest decline can have a much bigger impact on the index than some would think. Big Blue investors may be hitting the pause button as they learn that the company's latest SDK Java Technology Edition software leaves many of its customers' servers vulnerable to cyberattacks by hackers. This news comes from Security Explorations and Kaspersky Lab researchers, which sent the company an open letter about the issue on Monday.
McDonald's (NYSE:MCD) is still hurting from the news that same-store sales dropped due to economic issues overseas. Down 0.59%, the fast-food chain represents the fourth-highest-weighted stock on the index. With a new strain of avian flu working its way through China, the Golden Arches said that usual customers may have been wary to leave the house, leading to lower sales in April. The 2.9% drop in same-store sales for the segment that includes Asia was nowhere near the drop that Yum! Brands reported due to the avian flu outbreak -- a staggering 30% in April.
Trying to help the Dow move higher is 3M (NYSE:MMM), whose new line of masking tape is set to help consumers determine the right tape for the job. Since the company first introduced the product to the market in 1925, it has been working to make it easier on consumers to perform simple to complex tasks. The new line is designed and labeled to help purchasers with the task of figuring out what strength tape they need to get the job done. Ranging from 101+ to 501+, the new line goes from value masking tape for small general purposes to specialty high-temperature masking tape that can be used for industrial needs including high-temperature paint-baking applications.