This month's see-saw in the Dow Jones Industrial Average (INDEX: ^DJI) has turned triple-digit movements into an everyday occasion. We're on pace for another such day today, with a report from China saying the government will push to stabilize lending rates easing Wall Street's fears of a credit crunch in the world's second-largest economy. The Dow's up 149 points as of 2:20 p.m. EDT, and nearly every stock on the blue-chip index is in the green. Forget all of last week's fuss over quantitative easing; Wall Street has moved on. Let's look into the stories you need to know about today.
Alcoa can't capitalize
Good news out of China usually means good things for Alcoa (NYSE: AA), but that isn't the case today. The aluminum producer's shares have fallen 2.2% -- the worst performance on the Dow today -- as a glut of oversupply and lukewarm demand continues to slam the materials sector. Even worse, one of Alcoa's only promising markets, the U.S., added to its woes today: American GDP growth for the first quarter was revised down to 1.8% from a previous estimate of 2.4%. The disappointing GDP number owes primarily to reduced consumer spending, but it's still an unneeded hindrance for Alcoa, considering the firm's reliance on healthy economies for its own growth.
Alcoa's stock has now surpassed Caterpillar (NYSE: CAT) as the worst-performing Dow stock of the year, with shares down more than 8% year to date. Caterpillar may be facing the same problem of weak demand and a slowing Chinese market, but at least it has maintained its position as the global leader in its industry, which will pay off when slumping economies such as Europe eventually dig out of their current recessions. Caterpillar shares are down 0.7% today, but this stock's long-term future looks stable, even if its short-term outlook remains rocky.
Tech leader Cisco (NASDAQ: CSCO) is dealing with its own problems in China: Earlier this week, several Chinese state-run media outlets attacked the company as a security threat. Cisco claims it had no part in the U.S. surveillance program that has cooled relations between the two countries over the past week, but it's not unthinkable that China should move to rely more on domestic tech producers in order to safeguard its online security. It hasn't yet affected Cisco's shares, which are up 1.2% today, but it's an issue for shareholders to watch in the long run.
The media allegations are no reason to doubt Cisco's stock, which has been a top-10 performer on the Dow this year, but with the company picking up about $2 billion in revenue in China, investors should watch to see whether Cisco counters by investing more heavily in other high-growth nations in the region, such as Indonesia and India -- a move that could provide a brighter future for this company with less state interference.
Microsoft (NASDAQ: MSFT) has led all tech stocks up today, gaining 2.1%. The company agreed with major global carrier Telefonica on a deal to heavily promote its Windows Phone OS and supported devices. The move will help Microsoft gain some traction in mobile markets in which Telefonica operates, such as Germany, Brazil, and Spain. I doubt it will make much of a dent in a mobile market that's dominated by Android and iOS devices, but it's a sign that Microsoft may be able to firm up its place in mobile.