The first quarter ended this week, and until earnings season begins, the markets are a bit directionless. Yesterday's jobs report showed another mediocre 192,000 jobs were added to the economy last month and the unemployment rate stayed at 6.7%.
Through all the ups and downs of the week, the Dow Jones Industrial Average (^DJI 1.56%) did gain 0.55%, even including a sharp sell-off on Friday.
The week's top stocks
United Technologies (UTX 2.09%) was the surprising leader of the Dow this week, gaining 2.9%. The company benefited in part from a flight from tech stocks to more industrial manufacturers and with more tangible value. United Technologies has been struggling with cuts to military spending recently, but some restructuring, particularly in its Sikorsky helicopter unit, has shown some signs of a turnaround. Commercial sales should remain strong as the economy recovers and businesses and wealthy buyers enter the market, but domestic military spending will be a drag on results. This week that was of little concern to investors.
Caterpillar's massive equipment has helped fuel an economic recovery, but sales have disappointed recently.
It was a strange week for Caterpillar (CAT 1.00%), which rose 2.8% this week after its executives sat in front of a Senate committee investigating the company's tax practices. Chairman Dan Levin (D-Mich.) believes the company has moved profits overseas to save on taxes, but Sen. John McCain (R-Ariz.) was a surprise supporter of Caterpillar. Like many other international companies, Caterpillar doesn't illegally shift profit overseas, but it's beneficial to have foreign subsidiaries do some of its more profitable work. The tax debate will rage on and companies will look to avoid taxes, a tango I don't think will ever change.
Rounding out the Dow's top stocks is Cisco (CSCO 0.46%), which was up 2.6% and was one of the few hot tech stocks this week. This comes after announcing a $1 billion investment in the cloud in an effort to catch up to rivals that have had better vision in the cloud space. But as I mentioned, this week's theme was a flight to safety, and even though Cisco's business is under pressure from all sides, its 15 P/E ratio, 3.4% dividend yield, and $47 billion in cash make it a value in an overvalued tech market. The tides could swing the other way next week, so keep an eye on Cisco's financial performance in 2014, because growing revenue and profits is the only way Cisco will please value investors long-term.
