Why the Dow Soared Today

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The record will show that the Dow Jones Industrial Average (INDEX: ^DJI) gained a paltry 5 points today, or 0.04%. However, because of the price-weighted structure of the index, it would have climbed nearly 1% had it not been for IBM's (NYS: IBM) 4.9% fall. With shares priced near $200, Big Blue is responsible for about one-sixth of the blue-chip index, almost more than double any other component, meaning a big swing in the stock will move the Dow significantly.

IBM's sharp drop today came after a poor earnings report last night, as revenue dipped in every segment, leading to downgrades from two investment groups. This was the second quarter in a row that revenue declined, after growth had slowed significantly before that, and concerns have grown about its long-term profit. IBM did manage to eke out an earnings beat thanks to share buybacks.

Fellow tech giant Intel (NAS: INTC) followed IBM downward with a lackluster earnings report of its own. Shares in the chipmaker fell 2.5% as it took a hit from slowing PC sales and a writedown because of excess capacity. EPS again beat estimates, but investors were nonplussed by flat-lining revenue and a scaled-back outlook.


Financials Bank of America (NYS: BAC) and American Express (NYS: AXP) both reported earnings today to a middling response. Shares of B of A slipped by 0.2% as the company beat on the bottom line but missed on the top. Breakeven EPS topped the $0.07 loss the Street was looking for, but net income dropped 95% from a year ago. Still, the company expressed confidence in the recovering mortgage market and saw 27% growth in small-business lending. Shares of American Express, meanwhile, were down slightly in after-hours trading as net income ticked up by 1% and revenue grew by 4%. EPS of $1.09 matched Wall Street expectations while revenue was just shy. Spending by domestic cardholders grew by 8%, and the company said credit quality remains strong.

Elsewhere on the Dow, Alcoa (NYS: AA) led the gainers, rising 2.7% on surprisingly strong housing numbers. Housing starts and new building permits reached levels not seen since 2007, topping expectations by more than 10%. The 872,000 housing starts represented a 34% gain from a year ago, and fellow cyclical Caterpillar also jumped 2% on the news.

With Bank of America's earnings now in the rearview mirror, investors are probably wondering whether this is the right time to get on board. Luckily, our top banking analyst has just come out with a special premium report detailing the financial giant's opportunities and risks, as well other key areas investors need to watch. As a free bonus, this valuable insight comes with a year's worth of updates so you won't have to worry about parsing through future earnings reports or other important announcements. To get your copy of this brand-new report, just click right here now.

The article Why the Dow Soared Today originally appeared on Fool.com.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool owns shares of Bank of America, IBM, and Intel and has options on American Express. Motley Fool newsletter services recommend American Express and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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