Why the Dow's Ignoring Stronger Consumers

Before you go, we thought you'd like these...
Before you go close icon

When big issues like the debt ceiling debate and earnings season vie for investors' attention, economic data often gets overlooked. That seems to be the story today, as a 0.2% drop in monthly producer prices and a better-than-expected 0.5% gain in retail sales seem to point to improving economic conditions for consumers. Yet pockets of weakness still exist, with many high-profile retail names struggling to survive. That tug-of-war went to the bears today: The Dow Jones Industrials have fallen 27 points as of 10:55 a.m. EST.

Still, looking at the Dow, stocks that thrive on economic optimism were among the few winners this morning. Caterpillar , for instance, rose 0.7%, as the construction equipment giant is poised to profit regardless of whether growth comes from the U.S., China, or elsewhere around the world. If prolonged wrangling on government economic issues slows down the economy, Caterpillar will suffer somewhat, but a pullback in the shares could provide a buying opportunity.

Sticking with the consumer theme, Home Depot gained about half a percent. The home-improvement retailer has been counting on consumers to spend on home furnishings and renovation projects, and Home Depot really needs the recent strength in the housing market to continue in order to justify the big run higher in its stock price.


Outside the Dow, QLogic has climbed 7% following a positive preliminary outlook for its fiscal third quarter. With revenue and adjusted earnings now expected to finish above the range the company previously gave, a long-awaited recovery for network infrastructure stocks could finally be on the way.

Finally, Dell has gained another 1.5%, following up on yesterday's big jump after reports surfaced that the company might be open to a potential buyout from a private-equity firm. As more analysts look at various players in the private-equity world, it's important to put any potential deal in perspective: Despite the big rise in recent days, long-term shareholders have suffered huge losses from Dell over the years.

How consumers can boost your portfolio
Many of the picks that Motley Fool co-founder David Gardner has unearthed are revolutionary companies pioneering new consumer trends with blockbuster products. Find out how David discovers these stocks by taking a personal tour of his Supernova service. Click here to get instant access right now.

The article Why the Dow's Ignoring Stronger Consumers originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners