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What Propelled the Dow to a 3rd Straight Day of Gains

By John Divine - Sep 5, 2013 at 6:25PM

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Stocks end higher on a bevy of encouraging economic data.

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.

It's not hard to see why some people see the stock market as a giant, messy, speculative mishmash of cash, rising and falling unpredictably like a child on a pogo stick. Main Street has naturally lost some faith in Wall Street after the dramatic price swings we've suffered in the last 10 years. And, at the end of the day, the stock market is an (imperfect) instrument for predicting the future -- but it's still an instrument that can rain blessings upon investors culling the right information in investment decisions. Thursday brought a wealth of new information to study, information that drove the Dow Jones Industrial Average (^DJI 0.21%) higher, as the index added six points, or less than 0.1%, to end at 14,937.

The health-care sector jumped today, with UnitedHealth Group (UNH 0.37%) ending as the Dow's top performer after a broad study indicated that health plans under Obamacare may be more affordable than previously thought. If the Affordable Care Act can keep costs reasonable, health-insurance companies like UnitedHealth will substantially increase their pool of customers as millions of uninsured Americans start paying into the system. Stock in the insurer added 0.9% today. 

American Express (AXP 0.06%) also added 0.9% today, as a blistering-hot services sector grew in August at the fastest pace since 2005, according to the Institute for Supply Management. On top of that, the private sector added 176,000 jobs last month, and the four-week average of jobless claims reached its lowest level in nearly six years. This flurry of upbeat economic data gave investors a good feeling about AmEx, which is poised to benefit as consumers' wallets get fatter. 

On the losing side of the Dow, AT&T (T -1.69%) shed 1.2% Thursday, as speculation swirled that the company may consider a move into Italy's telecom sector via an acquisition of Telecom Italia. AT&T currently has a lot going for it: The company, a dominant force in a U.S. telecom oligopoly, practically prints money, and its stock pays a healthy 5.3% dividend. But a rapidly consolidating sector shows that organic growth is hard to find, and high-priced acquisitions are becoming the de facto way to keep growing.

Lastly, Home Depot (HD 0.78%) fell 1.6% Thursday as rising mortgage rates dulled optimism in the real estate market. The stock's pullback is a great example of how Wall Street digests and reacts to new information, as investors figured that higher rates would discourage growth in housing and damage Home Depot's business. But today's sell-off may reflect a short-term mind-set; the company has emerged as a leader in its market, and with all signs pointing to a solid economic recovery, the home improvement retailer shouldn't be slowing down anytime soon.

Fool contributor John Divine has no position in any stocks mentioned. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

The Motley Fool recommends American Express, Home Depot, and UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$32,871.63 (0.21%) $68.16
AT&T Inc. Stock Quote
AT&T Inc.
$18.04 (-1.69%) $0.31
UnitedHealth Group Incorporated Stock Quote
UnitedHealth Group Incorporated
$537.04 (0.37%) $1.98
American Express Company Stock Quote
American Express Company
$157.61 (0.06%) $0.10
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$312.10 (0.78%) $2.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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