Stocks were having such a great day until Federal Reserve Chairman Ben Bernanke testified to Congress earlier, an event that sparked the Dow Jones Industrial Average's (^DJI -0.98%) free fall from triple-digit gains. As of 2:30 p.m. EDT, the Dow has fallen to losses of 45 points, or 0.29%, with more than half of the blue-chip index's members in the red. A few picks are having good days, but the fear that the Federal Reserve will cut back on bond-buying measures has once again ignited panic among Wall Street's halls.
Stimulus concerns send the Dow into the red
The Fed will inevitably have to cut back on stimulus spending, but Wall Street's reactions make it seem like that would be the end of the world. Bernanke's comments to a congressional committee earlier today warned that slowing down his quantitative-easing policy too soon could threaten the economy's rise, cautioning that the U.S. economy isn't strong enough yet to grow on its own. Those remarks propelled stocks to their highs on the belief that bond-buying wouldn't slow down soon. Considering that the economy grew by 2.5% in the first quarter, analysts and observers would be happy to see stimulus continue.
Bernanke wiped out all that optimism when he answered a question on whether bond-buying would be slowed before Labor Day. The chairman indicated that the Fed could discuss winding down stimulus measures in its next few meetings -- and stocks dropped most of their gains as a result, recovering briefly around noon before retreating even further in the afternoon. Ouch.
Home Depot's (HD -0.31%) not having any of that, however. The home improvement retailer's stock is up another 1.8% today following yesterday's strong earnings report, in which the company revealed that it had beaten analyst projections on both the top and bottom lines. Further, Home Depot got a double dose of good news from other companies in the industry today: Homebuilder Toll Brothers posted a 46% profit gain in its most recent quarter on increased housing demand and closings -- a sign that the home market is continuing to improve and may further fuel Home Depot's rise.
Furthermore, rival Lowe's (LOW -0.14%) missed expectations for its quarterly sales in today's earnings report, indicating that Home Depot still has the lead on its closest competitor. While Lowe's CEO Robert Niblock said recent sales after the first quarter's end should make up for the revenue miss, the company's same-store sales dipped 0.7% for the first quarter, falling further behind Home Depot, whose same-store sales rose. Although Lowe's will similarly benefit from the housing rebound, Home Depot is clearly holding the advantage in this industry.
Pfizer's (PFE -3.85%) stock ranks as the top Dow leader today, up 2.4%. The firm announced that it would offer shareholders the chance to swap Pfizer shares for Zoetis stock tax-free as the company looks to reduce its 80% stake in its former animal-health business, which it spun off earlier this year. The move is Pfizer's latest attempt to concentrate on its core pharmaceutical business. Furthermore, investors can view the move as a sort of stock buyback, with Pfizer offering more Zoetis shares and constricting outstanding shares of its own business. Not a bad choice for investors, considering that each Zoetis share is worth more than a share of Pfizer.
Finally, Hewlett-Packard is (HPQ 0.11%) up 0.9% ahead of its quarterly earnings release, due after the closing bell today. Some have expressed optimism about HP's turnaround strategy, particularly as the company looks to diversify away from PC sales into mobile and other more profitable industries. However, personal computers remain a sizable portion of HP's business, and with PC shipments having fallen nearly 14% in the first quarter, don't expect HP's troubles to be over so soon. This stock may be up 70% over the past six months, but until HP's turnaround is complete, expect more challenges to arise.
