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Confident Consumers Send Dow Higher; IBM, Caterpillar Jump, But Disney Deal Fails to Inspire

By Dan Caplinger - Mar 25, 2014 at 11:00AM

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Positive economic data sent the Dow up sharply, but can the rally last? Find out more here.

The Dow Jones Industrials ( ^DJI -0.17% ) began Tuesday on good footing, gaining 41 points as of 11 a.m. EDT in the wake of solid indications that consumers have confidence in the U.S. economy's recovery. The Conference Board's reading of consumer confidence for March rose by four points to 82.3, offsetting concerns about a 3.3% drop in new-home sales last month. In addition, Philadelphia Federal Reserve Bank President Charles Plosser gave investors some reassurance that the Fed didn't intend to signal a huge policy change via Chairwoman Janet Yellen's comments in her press conference last week. Caterpillar ( CAT 0.51% ) and IBM ( IBM 1.66% ) both posted impressive gains, but Disney ( DIS -0.67% ) dropped despite announcing a new acquisition.

IBM gained 1.6% after announcing a new collaboration with Pitney Bowes ( PBI -3.08% ) to provide hybrid cloud location services. The partnership, which involves IBM's platform-as-a-service offering code named BlueMix, is designed to help IBM clients discover more information about their own customers, making it easier to offer tailored customer service and products that are relevant to their particular geography. For Pitney Bowes, the opportunity to appear as a third party on IBM's BlueMix is critical to its broader strategy of providing enterprise-based solutions; Pitney stock rose more than 1% in morning trading. For IBM, the move demonstrates the value of its platform and could lead to further collaborations.

Caterpillar climbed nearly 2% even as it faces Senate scrutiny regarding how the heavy-equipment maker handled its international taxes. On April 1, the Senate will add Caterpillar to its list of companies that it has examined in connection with using offshore entities and cross-border transactions to control tax liability; Caterpillar plans to testify alongside its accounting firm at a committee hearing. For Caterpillar, though, the issue is arguably less important than signs of a stronger economy, especially since it is far from the only company using techniques to minimize U.S. taxation.

Finally, Disney gave up early gains and eased downward by 0.6% after announcing last night that it would buy online-video producer Maker Studios for $500 million and a potential earnout of up to $450 million more. Unlike Disney's past acquisitions of companies such as Pixar and Marvel, Maker Studios doesn't have the track record that guarantees success from the transaction. Yet the move represents Disney's recognition of the importance of online video, and in time it could help Disney become a bigger player in that growing space to round out its multimedia offerings.

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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
International Business Machines Corporation Stock Quote
International Business Machines Corporation
IBM
$118.84 (1.66%) $1.94
Caterpillar Inc. Stock Quote
Caterpillar Inc.
CAT
$197.80 (0.51%) $1.01
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$146.22 (-0.67%) $0.98
Pitney Bowes Inc. Stock Quote
Pitney Bowes Inc.
PBI
$6.62 (-3.08%) $0.21

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

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