After a morning during which the Dow Jones Industrials (DJINDICES:^DJI) set a new intraday high, traders have to be disappointed with the Dow's eventual loss of about half a point, or 0.0027%, which left the venerable stock market benchmark a whopping four points below its Dec. 31 record high. Yet, despite the fact that the Dow's flat performance today suggests investors' willingness to own stocks even after a massive five-year bull run, flagging performance from growth stocks Nike (NYSE:NKE) and Home Depot (NYSE:HD) hints at fatigue among high-momentum gainers that have led the Dow and other markets higher over the years.
Nike's three-quarter percent drop is just the latest in a series of declines ever since last month's earnings report for the athletic shoe and apparel maker. As tempting as it is to blame the company's bad fortune on short-term news events like the withdrawal of endorsement partner Tiger Woods from the Masters golf tournament later this month, Nike has many investors wondering whether it can sustain its growth pace without a stronger contribution from high-potential markets like China. In its quarterly report, Nike reported a big jump in the amount of money it spent on overhead expenses, raising concerns about rising costs more broadly, and whether top-line growth can exceed the rate of increase in overhead. One key test for Nike will come this summer, as Brazil prepares for the World Cup and Nike makes its play to try to capture more of the soccer market from Adidas. If it's successful in Brazil, though, Nike's shareholders could get a big reward, as growth could pick up strongly from a rising class of new emerging-market consumers.
Meanwhile, Home Depot fell 0.7% amid mixed signs for the housing market nationally. Across the country, many states have seen prices rise far enough to exceed their past peaks from the housing boom, making some investors nervous about a newly budding housing bubble and the impact it could have on both homebuilder stocks and on related industries like Home Depot's home-improvement business. Tomorrow's employment report will play a vital role in whether Home Depot can move forward from current levels, as the retailer hits its key spring season and needs to build momentum in order to perform well. After years of finding ways to execute well and deliver growth even in sluggish housing markets, the onus is on Home Depot to find new ways to capitalize on the economic environment, no matter which way it moves.
The benefit of investing in Dow stocks is that even its growth giants don't usually have the risk levels or amount of momentum that other stocks have. As a result, even with the challenges that Nike and Home Depot face, the need for immediate kneejerk reactions among shareholders is far less than it might be if you owned lower-quality stocks in your portfolio. Nevertheless, though, the Dow will need good performance from its growth stocks if it wants to keep soaring to new record highs.