The Dow Braces for Earnings Storm

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As we kick off the third week of January, the questions remains whether 2012's hot start will show signs of slowing, or fourth-quarter earnings, including five different Dow components reporting tomorrow, will continue to propel the markets higher.

But before we jump into the day's events, let's cover how the three largest indices fared yesterday.

 

Gain / Loss

Gain / Loss %

Ending Value

Dow Jones Industrial Average (INDEX: ^DJI) (11.66)0.09%12,708.82
Nasdaq (INDEX: ^IXIC) (2.53)(0.09%)2,784.17
S&P 500 (INDEX: ^GSPC) 0.620.05%1,316.00

Markets generally closed flat for the day, although all three indices rallied back in afternoon trading, so the results could have been worse.  The Nasdaq closed down for the second-straight trading session while the S&P 500 managed to stay above 1,300 and the Dow essentially treaded water after gaining nearly one hundred points on Friday. Blame the seemingly never ending (at least until default) Greek debt crises, which took a new turn as the country has allegedly presented a "final offer" to private creditors. In related news, Gold hit a six-week high, closing at $1,680 per ounce. Consider this the calm before tomorrow's earnings storm when du Pont, Johnson & Johnson, McDonald's, Travelers (NYS: TRV) , and Verizon (NYS: VZ) -- a full sixth of the index -- reports.

Interestingly enough, all five companies traded down today before their reports. Let's look at the two biggest decliners and see why investors may be hedging their bets pre-earnings.

The banking sector went largely through earnings last week, and while there were some isolated problems the results were generally positive. Insurance company Travelers is also looking to rebound to more normal numbers after reporting a substantial loss earlier in the year. Its expected $1.52 in earnings is less than the $1.89 it tallied a year ago, but over 50% more sequentially. Investors appear concerned over catastrophic losses and low reinvestment rates as shares traded down 2.1%, making it the worst-performing Dow component of the day.

Verizon had the second-worst pre-earnings day, falling 1.5%, perhaps over concerns from margin compression thanks to subsidizing iPhone sales or maybe the large capital expenditure used to expand the company's wireless spectrum. Any dip in the share price post-earnings could give investors a nice entry point to add the telecom's 5% yield to their portfolios.

Stay tuned to The Fool for more analysis on recent earnings and general market movements throughout the day.

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At the time this article was published David Williamsonowns shares of Johnson & Johnson, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson.Motley Fool newsletter serviceshave recommended buying shares of McDonald's and Johnson & Johnson.Motley Fool newsletter serviceshave recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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