Today's Best and Worst DJIA Stocks
Following a mixed pair of economic reports, the Dow Jones Industrial Average is up 0.49% to 15,300 points as of 1:25 p.m. EDT. The S&P 500 is up 0.72% to 1,652.
Here are today's U.S. economic reports:
NFIB small-business optimism index
The key report here is the National Federation of Independent Business' small-business optimism index, which fell by 0.9 points to 93.5. Chief economist Bill Dunkelberg wrote a downbeat note, saying: "After two months of incremental but solid gains, the Index gave up in June. This appears par for the course, given that there is no reason for small employers to be more optimistic and lots of things to worry about." However, it was not all bad news for the economy. The data showed that while business optimism dropped, a larger net percentage of businesses expect to increase employment going forward -- a positive sign for the employment situation in the U.S., where unemployment still sits at 7.6%.
Small businesses have been hit hard since the downturn, with far less access to capital than large businesses as banks tighten lending standards. Small businesses are also far more challenged than large ones when it comes to complying with the ever-increasing number of government regulations. For the time being, small-business optimism is likely to stay depressed as conditions for small business remain tough.
IBM is today's worst Dow stock, down 2%, single-handedly holding the Dow back. I've written before why I'm not a fan of how the Dow is structured. Due to the simplistic nature of the DJIA, its weightings are based solely on stock prices, and IBM is the largest component of the DJIA, making up nearly 10% of the index -- this, despite the fact that IBM is by no means the largest company in the index at just half the size of ExxonMobil.
IBM is down today after a Goldman Sachs analyst downgraded the stock from "buy" to "neutral" and lowered its price target from $220 to $200. The analyst wrote, "We believe IBM's long-term secular prospects remain sound, but the company appears to be going through a challenging period that may limit operational earnings upside and produce more quarterly volatility than investors have been accustomed to." While at first this may appear to be an analyst focusing too much on the short term, he also lowered his earnings expectations for the company for the next three years. At 13 times earnings, IBM could be a sound long-term buy if you can handle the volatility in earnings. Fool analyst Andrew Tonner took a look at IBM last month, and you can hear his take on whether IBM is a buy here.
Today's Dow leader is Caterpillar , up 3% on no real news. Caterpillar is on the five most shorted stocks on the Dow with 3% of its shares outstanding sold short. As the mining industry around the world starts to be challenged by falling commodity prices, Caterpillar's business will not be as robust going forward. It's this worry that Caterpillar will get hurt by the boom-bust cycle of commodities that has investors pricing the shares at just 11 times earnings. That said, some investors still think Caterpillar is worth buying. Fool contributor Daniel Ferry recently laid out three reasons to buy Caterpillar.
Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who have stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," the Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.
The article Today's Best and Worst DJIA Stocks originally appeared on Fool.com.Dan Dzombakcan be found on Twitter @DanDzombakor on his Facebook page,DanDzombak. He has no position in any stocks mentioned. The Motley Fool owns shares of International Business Machines. 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.