Markets Give Back Most of Yesterday's Gains
After gaining 106 points on the Dow Jones Industrial Average's 20 consecutive winning Tuesday, the blue-chip average lost 106 points today. The Dow fell 0.69% this afternoon and now sits at 15,302, while the S&P 500 lost 0.7% of its value and the Nasdaq declined 0.61%. Unlike the Dow, the S&P 500 lost more than the 0.63% it rose yesterday while the Nasdaq fell less than the 0.86% it increased on Tuesday.
One of the two main reason stocks declined today was interest rates are climbing and investors looking for safe reliable yields are now beginning to move out of equities and into bonds. This shift is very clear when we look at some of the major consumer staples, which declined more than 2% today on very little news. The other reason stocks declined can be related to the International Monetary Fund's prediction for Chinese economic growth in 2013 and 2014. Previously, the growth was estimated at 8% but has now lowered the growth rate to 7.75%.
A few Dow losers
Both Verizon and AT&T lost value today after Google Fiber drew investors' attention yesterday and raised concerns about the longevity of the two service providers. The hype all started after an analyst at Bernstein suggested that long-term investors in cable and phone companies may want to keep a close eye on Google Fiber and that this service may slowly cook the current companies without them even knowing it. The short- and medium-term risks for Verizon and AT&T is very little, but over the next 10 years, if the companies don't continue to upgrade service and offer customers with compelling offerings, Google may easily win over the business. Verizon lost 2.46% today while AT&T moved lower by 0.75%.
News from the IMF may be one reason shares of Coca-Cola fell by 2.25% today. Coke is not only the world's best-known brand, but a company that needs markets outside the U.S. to be strong during a time that consumption of soft drinks here at home is declining. In addition to a slowing Chinese economy, rising interest rates are likely putting pressure on Coke's stock price. As investors who seek safe, reliable income no longer are forced to buy stocks and can find attractive yields in bonds, they will likely sell their shares in consumer staple companies like Coke, which will result in a lower share price for at least the short term and could create a great buying opportunity.
McDonald's lost 2.16% today after an analyst raised concerns about future headwinds the company will have to overcome and lower the earnings-per-share estimates. An analyst at UBS believes that weak sales in Europe combined with the impact of the currency exchange rates will lower McDonald's earnings in the coming months. Previously, UBS had a higher earnings-per-share estimate than most of the other firms that follow the company, but due to these issues, it has lowered EPS estimates down to the consensus level. The firm, though, still has a buy rating on the stock with a $110 price target.
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The article Markets Give Back Most of Yesterday's Gains originally appeared on Fool.com.Fool contributor Matt Thalman has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola. It recommends and owns shares of McDonald's. Check back Monday through Friday as Matt explains what caused the Dow's winners and losers of the day and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513. 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.
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