Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
Ordinarily, positive economic news puts investors in a good mood, and this morning's slate of data seemed to fit the bill perfectly. A drop in the U.S. trade deficit supported the view that the U.S. is becoming more energy-independent and less reliant on foreign imports to feed consumer demand, while new CoreLogic data on the home-price front showed gains of 1.9% in June that helped add to a nearly 12% pace of growth over the past year. Yet the markets ignored that good news, perhaps instead noting the rapid pace of stocks' record gains recently and choosing to pull back from all-time high levels. As of 10:50 a.m. EDT, the Dow Jones Industrials (DJINDICES:^DJI) are down 116 points, or 0.75%, while the S&P 500 has fallen back below the 1,700 level.
Showing the tension within the Dow are Disney (NYSE:DIS) and IBM, which have moved in opposite directions this morning. Disney has climbed 0.5% in advance of its earnings report later today as investors hope the disappointment of the company's film The Lone Ranger will pale in comparison to successes elsewhere across Disney's multimedia empire. Disney Interactive launched a video game based on its coming Planes release this morning, demonstrating how effectively integrated the company is as it ties its content together to maximize revenue.
Meanwhile, IBM has dropped more than 2% after getting downgraded by Credit Suisse. The dour picture for tech also helped send Hewlett-Packard (NYSE:HPQ) lower by nearly 2%, as analysts are starting to doubt that much growth is available in popular initiatives like cloud computing and big data. With HP, IBM, and many other tech giants fighting over the space, fierce competition could limit the opportunity for high-margin profit growth, especially if the companies end up having to fight price wars to attract business.
Another sign of Dow defensiveness is the fact that consumer giant Procter & Gamble (NYSE:PG) is among the average's few winners, rising 0.4%. Investors often look to P&G as a defensive stalwart in times of market stress, and even though the company has its own valuation issues to contend with, shareholders can count on relative stability from consumer-products companies, which are more resilient in the face of changing economic conditions than most other stocks.
Finally, outside the Dow, SPDR Gold (NYSEMKT:GLD) has lost more than 1% as gold prices once again fall below the $1,300 mark. The drop is a disappointment for those who had taken heart from the yellow metal's recent bounce, but in light of continued worries about the pace at which the Fed is likely to exit its quantitative-easing strategy, gold investors appear to remain fearful that commodities will suffer the most damage from the eventual normalization of monetary policy.