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.
For the fifth consecutive week, the Dow Jones Industrial Average (^DJI 0.46%) has changed by more than 1% -- at first down by 1.24% and 1.21%, and then up 1.09%, 1.07%, and 1.1% over the past three weeks. The market wins began as investors rightfully felt confident that lawmakers would reach a compromise to avoid hitting the debt ceiling, but this past week, stocks rose based on solid earnings reports. The S&P 500 also rose 0.87% this week, and the Nasdaq increased 0.74%. Seeing the markets move on actual company performances rather than on macro-events that may or may not affect businesses is what we long term-oriented investors like to see.
Before we jump into the Dow's big losers of the week, let's look at the Dow's top stock. Boeing (BA 0.27%) rose by a mind-boggling 7.07% this past week, after the company reported quarterly earnings mid-week. The aircraft manufacturer increased revenue by 11% compared with the same quarter last year, while earnings per share jumped more than 33%. Sales of $22.13 billion beat analyst expectations of $21.68 billion, and earnings per shares of $1.80 surpassed the expected $1.50. Management increased its full-year guidance to a range of $6.50 to $6.65 per share, up from its previous range of $6.20 to $6.40. Boeing shareholders certainly had a nice week, and it would seem the Dreamliner issues from earlier this year haven't hurt the company up to this point.
Last week's big losers
As Boeing was flying higher on Wednesday, Caterpillar (CAT 1.47%) was in a nosedive. The stock fell 6.06% that day after reporting quarterly results that failed to impress investors. Caterpillar ended the week 2.94% lower, enough to make it the Dow's worst-performing component of the week. The company reported quarterly profit of $1.45 per share, down from $2.54 last year during this quarter and lower than analysts' already reduced expectations of $1.66. The poor EPS results came as sales fell 18% during the quarter, with sliding sales of mining equipment. Management also cut full-year sales expectations from a range of $56 billion to $58 billion to just $55 billion, while cutting EPS estimates from $6.50 to $5.50.
Cisco (CSCO -0.51%) lost 2.17% this past week, making it the Dow's third worst-performing component. The company doesn't report until Nov. 13, but competitors Juniper Networks and F5 Networks did come in this week with underwhelming earnings, setting the stage for investors to expect disappointing results out of Cicso. It doesn't help that Cisco reported poor results last quarter and announced layoffs to cut costs. Of course, poor performance from its competitors could mean Cisco has been picking up some of their business. We'll know soon enough, but either way, trading on rumors or competitors' results is no way to invest. Sit tight until after the earnings report -- or, better yet, until we've had enough time to see whether Cisco can turn things around.
And finally JPMorgan Chase (JPM 0.18%), the Dow's second worst performer, lost 2.81% last week. The stock crept down every day except Friday, as investors deal with the announcement that the bank will pay $13 billion to settle a civil case relating to the bank's involvement in mortgage-backed securities created before the housing crash and recession. That's a huge number, and the bank and investors alike have been aware it could be coming, but it may not be the last billion-dollar fine the bank will face this year. Other problems, such as the London Whale incident and the Bernie Madoff Ponzi scheme, may continue to haunt the bank in the future.
The other Dow losers this week:
- McDonald's, down 0.44%
- Merck, down 0.15%
- Nike, down 0.3%
- United Technologies, down 0.2%
- UnitedHealth Group, down 1.65%
