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.
Looking at the move in the stock market, you might conclude that today was a quiet day, with the Dow Jones Industrials (DJINDICES:^DJI) eking out a tiny gain of just seven points on the session. Even though broader stock market measures posted somewhat larger gains, the real action was in the bond market, where the yield on the 10-year Treasury bond climbed perilously close to the 3% mark for the first time since mid-2011. Commodities were mixed, with oil climbing, but gold plunging as relatively strong economic data in the U.S. increasingly support the much-anticipated tapering of Federal Reserve bond buying.
Some Dow stocks, however, posted fairly substantial declines in light of the big moves in interest rates. Home Depot (NYSE:HD) suffered the biggest losses of any Dow component, falling more than 1.5%. Some analysts have feared that Home Depot's business could suffer if higher rates lead to a reversal of the recent gains in the housing market, even though the home-improvement retailer managed to post impressive share-price gains even during the worst of the housing bust. But another potential problem could come from pressure to lift minimum wages in the U.S., as company executives wrote a letter to Washington mayor Vincent Gray recommending that he veto the so-called living-wage bill that would set a $12.50 minimum wage for certain big-box retailers. If the trend spreads, higher wage costs could eat into profitability for Home Depot.
AT&T (NYSE:T) added to losses from yesterday, falling another 1.2%. Investors are likely nervous that the wireless giant could make a big mistake if it responds too quickly to Verizon's purchase of full control of its U.S. wireless division. With speculation swirling about different potential targets that AT&T could seek a merger with, the concern that many shareholders have is that the company could overpay for foreign telecoms that are already under stress from poor conditions in Europe, and questionable growth prospects in emerging markets.
Finally, Coca-Cola (NYSE:KO) fell 0.8%. Fool contributor Amanda Alix blamed the decline on a boycott organized by a group that objects to the beverage giant's sponsorship of a controversial television show. But another potential reason for the stock's decline could stem from the rise in bond yields. Slow-growth dividend stocks often start trading like fixed-income securities, and when bond prices fall, so do those dividend stocks. If that's the case, it's bad news for Coca-Cola, as no company wants its investors to think so little of its growth prospects that its stock acts like a bond.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Coca-Cola and Home Depot. 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.