Will Nervous Fed-Watchers Crash the Dow Again?
When it comes to market-moving news, the Federal Reserve has been just about the biggest newsmaker in the business in recent years. Ever since the bull market began in 2009, the Fed's constant support has pushed stock markets sharply higher, defying skeptics and helping stock benchmarks set dozens of new all-time record highs along the way. Yet in more recent meetings, concerns about when the Fed's support may have to end have caused turbulence in share prices and a big spike in interest rates. With the Fed meeting this week, investors saw this morning's weaker numbers on pending home sales as a reminder that the Fed's impact on rates is rippling through the economy, with implications not only for bonds, but for stocks as well. As of 10:45 a.m. EDT, the Dow Jones Industrials are down 37 points, or 0.24%, while the broader market has fallen by a similar percentage.
Yet some of the news hitting Dow component stocks seems almost trivial compared to its impact. Take Boeing , for instance, which has expanded its inspection of locator beacons to aircraft models beyond the 787 Dreamliner after airlines flying the Dreamliner reported problems with emergency-transmitter wiring. This would ordinarily be a routine matter -- just one of probably hundreds of inspections that Boeing does on a regular basis. The stock's 0.5% drop reflects just how anxious investors are about anything that has to do with the 787 right now, and further worries could create buying opportunities for longer-term investors willing to look beyond immediate concerns.
Nervousness also hit Bank of America stock, which has dropped 1.3%. Pending-home-sales weakness could reflect overall trouble in the mortgage market, which, in turn, would affect B of A's strategy to boost the importance of mortgage lending as part of its overall operations, but the broader question facing the bank now is whether heightened regulation could further affect its ability to see profits grow in the future. B of A has supported regulatory initiatives like Dodd-Frank, but it's unclear whether that support is simply an effort to avoid more draconian regulation that could take its place.
Yet investors aren't nervous about all stocks. Both AT&T and Verizon have posted gains of between 0.5% and 1% today. With both carriers proposing new plans to allow customers to upgrade their smartphones more frequently, investors hope that faster flow-through of smartphone inventory could help reduce the importance of subsidies in driving sales. Given the massive earnings hits that smartphone subsidies have caused to Verizon and AT&T in the past, any paradigm shift could lead to big improvements that would move the needle even for the telecom giants. With positive implications for smartphone makers as well, it's likely the whole industry will climb aboard efforts to push the new initiatives forward.
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The article Will Nervous Fed-Watchers Crash the Dow Again? originally appeared on Fool.com.Fool contributor Dan Caplinger owns warrants on Bank of America. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America. 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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