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China's Slowdown Hits Stocks; Sears Holdings Jumps 6%

By John Divine – Mar 10, 2014 at 6:17PM

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DryShips slumps, Home Depot falls as unexpected trade deficit worries investors

Today's stock market, it seems, refuses to let troubling news get in the way of its steady ascent -- an ascent that's began exactly five years ago. The troubling news of the day was from China, where the world's second-largest economy unexpectedly swung to a trade deficit, as exports fell a whopping 18.1% last month. Not only does this imply soft global demand for Chinese goods and services, but it threatens the strength of China's economy itself; should Asia's growth engine suddenly break down, U.S. markets would take a severe hit too, due to the interconnected nature of the financial world. Wall Street isn't overly worried about this outcome, though, and the Dow Jones Industrial Average (^DJI 0.44%) lost just 34 points, or 0.2%, to end at 16,418.

Home Depot (HD 0.77%), which lost 0.5% today, could prove to be a resilient investment option in the case of a China-induced market slump. After all, as my colleague Dan Caplinger points out, Home Depot stock has been the top-performing stock in the Dow since the 2007 market peak. I found that a little surprising, given the nature of the financial crisis sprang from an overheated real estate market, and if Home Depot's strength in the last seven years doesn't prove its resiliency, then I don't know what does.

When I think about resilient stocks, the name Sears Holdings (SHLDQ) doesn't exactly come to mind, and I suggest you don't let its 6% gains today earn your confidence, either. The department store actually had to warn investors before its fourth quarter results even came out that the financials were going to be abysmal. And abysmal they were; CEO Eddie Lampert himself even said the quarter was "tough to terrible," as Sears lost more than $350 million over the holiday season. Consider the fact that the company's spinning off its most promising segment, Lands' End, to raise cash, and shareholders better also invest in some migraine tablets. 

Finally, shares of dry bulk shipper DryShips (DRYS) slumped 4.3% in trade on Monday. It's a perplexing drop, because the stock usually rises and falls with the Baltic Dry Index, a gauge of bulk shipping rates across the world. The last time that index traded (on Friday) it closed with 4.3% gains. One counterintuitive threat to DryShips in the coming year is a game theory-esque dilemma: increasing demand is expected to send shipping rates soaring soon, but if DryShips and competitors all expect this, they'll rush to increase the supply of new ships, thereby driving rates lower in the process.

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 Home Depot. We Fools don't 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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