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.
After a long holiday weekend, traders came into a new week looking a bit groggy, with the Dow Jones Industrials (DJINDICES:^DJI) down 17 points as of 11 a.m. EST. Yet perhaps the most impressive thing about the Dow's performance is that it withstood pressure from different sources. First, Coca-Cola's (NYSE:KO) earnings this morning didn't provoke a fizzy response from the stock market. But even beyond the beverage giant's results, sizable drops for consumer giant Procter & Gamble (NYSE:PG), as well as telecom rivals Verizon (NYSE:VZ) and AT&T (NYSE:T), weighed on the Dow -- even if they didn't create a big loss for the overall average Tuesday morning.
Coca-Cola's drop of nearly 4% came in the aftermath of its fourth-quarter earnings report. Coca-Cola has struggled mightily for several quarters now, and today's report was no exception, as sales fell by 4% on volume growth of just 1%, leading to an 8% drop in profit and prompting the company to take measures to reduce costs further. Even though Coca-Cola's overall market share improved, investors weren't pleased with the ongoing difficulty that the beverage giant is having trying to stoke its growth fires.
Procter & Gamble fell nearly 2%, with investors likely looking at the signs from Coca-Cola's report and applying them to the consumer products company's prospects. Like Coca-Cola, P&G relies on international revenue to a large extent, leaving it vulnerable to the same currency-related issues that contributed to Coke's falling results. Moreover, the two companies also share relatively similar valuations, which at current levels don't allow for much margin of error for either stock.
Competition among companies has also gotten fiercer in many industries, with wireless telecom being the most notable example recently. Both AT&T and Verizon fell more than 1% this morning as the companies continue to wage war through pricing discounts and other promotional activity. The rivals have made it clear that they're laser-focused on the U.S. market right now, with AT&T saying late last month that it wouldn't seek to buy the remainder of Vodafone after Verizon bought out Vodafone's share of their Verizon Wireless joint venture. Yet if lower-priced plans don't bring in enough new customers to offset falling revenue, the moves could simply cost Verizon and AT&T money. If that happens, then even a high dividend yield wouldn't be enough to keep investors satisfied for the long run.