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Why the Dow Bounced Back With 108-Point Gains Today

By John Divine - Mar 20, 2014 at 6:36PM

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Lumber Liquidators and Lions Gate Entertainment head in different directions; Wal-Mart aids Dow advance

Following yesterday's 114-point pullback, 25 out of 30 stocks in the Dow Jones Industrial Average ( ^DJI -0.17% ) finished in positive territory Thursday, as industrial production picked up. The Philadelphia Fed Survey swung decisively into positive territory in March, showing an uptick in manufacturing activity, and an implied optimism going forward. Wall Street's short attention span worked to its benefit today, and investors forgot Wednesday's interest rate fears, bidding the Dow 108 points, or 0.7%, higher, as it finished at 16,331.

Wal-Mart ( WMT 1.51% ) shares didn't hurt the blue chip index either; the stock tacked on 1.3% in trading today. Judging by its actions this week, the megaretailer isn't satisfied with its current position as one of the world's corporate titans, as it looks for ways to expand and grow. For example, Wal-Mart announced plans on Monday to encroach on Game Stop's bread-and-butter used video game business, offering trade-ins for store credit or cash. It's also beginning an aggressive spring sales push on outdoor merchandise, announced today, which will likely earn Wally World even more foot traffic.

Like the Dow, shares of Lions Gate Entertainment ( LGF-A 0.20% ) bounced back from a lousy performance yesterday, gaining 2.8% after a 5% slump on Wednesday. Shares are extra-rocky this week as investors anxiously await the Friday release of Divergent, the first of three films inspired by the book trilogy of the same name. Lions Gate decided to stick with the formula it used in the wildly successful Hunger Games films: Buy the movie rights to an insanely popular series of recent novels, and laugh all the way to the bank. With critics panning Divergent in early screenings, this won't be another Hunger Games, so it's a good thing Lions Gate has two more flicks to go in the latter series.

Lastly, flooring retailer Lumber Liquidators ( LL 2.55% ) shed 4.6% on Thursday. Sales of existing homes in February fell 7.1% from February of last year, as higher home prices make buyers a bit more hesitant. Few stocks have capitalized on the resurgent housing market like Lumber Liquidators, which has quadrupled in the last three years alone. As low interest rates, refinancing, and the economic recovery gave people more money to remodel, Lumber Liquidators saw profits nearly triple from $26 million in 2011 to $74 million in 2013. With the refi market cooling down, and today's data showing waning home sales, I don't blame investors for liquidating this stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,580.08 (-0.17%) $-59.71
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$137.51 (1.51%) $2.04
Lions Gate Entertainment Corp. Stock Quote
Lions Gate Entertainment Corp.
LGF-A
$15.07 (0.20%) $0.03
Lumber Liquidators Holdings, Inc. Stock Quote
Lumber Liquidators Holdings, Inc.
LL
$16.08 (2.55%) $0.40

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

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