A two-day decline for the Dow Jones Industrials (^DJI 1.00%) shouldn't be particularly noteworthy, even when it meant the Dow lost its hard-fought 17,000 milestone. Yet today's 117-point drop for the Dow has left investors nervous about what tomorrow will bring, with minutes from the Federal Reserve combining with the beginning of second-quarter earnings season to provide some answers to the future course of the U.S. economy. Today's drop sent more than two dozen Dow components falling, but investors emphasized the value of defensive names, sending Wal-Mart (WMT 0.43%) and Procter & Gamble (PG 0.31%) to modest but significant gains Tuesday.
Wal-Mart climbed three-quarters of a percent even as the chief of the retailer's U.S. division reiterated some troubling news for the company. Bill Simon noted that even with the economy back on a growth trajectory, Wal-Mart isn't seeing shopping activity rise as quickly as the company would ordinarily expect this long after the last recession. Yet part of Wal-Mart's appeal during the 2008 recession was that customers who had previously shopped at more upscale retailers looked to Wal-Mart for bargain opportunities. Moreover, Wal-Mart has made numerous efforts to adapt to changing conditions in the retail industry, using a small-store footprint to encourage repeat trips and address the higher fuel costs of having to drive longer distances to big-box format stores. If Wal-Mart can capture daily business as well as longer-term stocking-up trips among consumers, then it could finally turn around its ailing domestic sales and defend itself against competition from deep-discount stores and online specialists.
Procter & Gamble gained almost half a percent. The consumer-products giant has a lot riding on its growth initiatives, with the stock's current valuation implying much faster earnings growth than Procter & Gamble has been able to produce in recent years. Still, P&G has done a reasonably good job at reawakening its ability to come up with innovative new products, and at the same time, it has also figured out how to focus more on what it sees as its best business prospects while divesting itself of non-core divisions. Even so, though, Procter & Gamble's hefty earnings multiple gives shareholders less margin of safety than they're used to getting from a defensive stock.
The Dow Jones Industrials have produced minor drops countless times during the bull market, only to bounce back and reach toward new record highs again. Nevertheless, interest in defensive Dow names like Wal-Mart and Procter & Gamble is just one more signal that investors might think the good times for the Dow might be coming to an end.