Why the Dow's Flat This Afternoon

The stock market initially rose sharply in light of generally favorable earnings from Caterpillar and 3M but gave up those gains in afternoon trading. News of weaker-than-forecast new home sales that fell for the first time in four months dampened hopes that the housing market may have hit bottom. Just after 2 p.m. EST, the Dow Jones Industrials (INDEX: ^DJI) were down just two points to 12,755, while the S&P 500 fell six points to 1,320.

Beyond the earnings scene, Home Depot (NYS: HD) fell almost 1.5%, due largely to the bad housing news. Only 302,000 new homes were sold in 2011, down 6% from 2010 levels and the lowest number since government data began tracking figures in 1963.

Wal-Mart (NYS: WMT) stock also fell, losing about 1%. The world's biggest retailer faces the potential for greatly increased competition from J.C. Penney (NYS: JCP) , which jumped sharply by about 11% on hopes that the turnaround led by new CEO Ron Johnson will be successful. With a combination of price cuts, store overhauls, and pushing further into the discount arena, J.C. Penney is definitely getting into Wal-Mart's traditional turf.

On the upside, Johnson & Johnson (NYS: JNJ) saw modest gains, following through on yesterday's small advance in the aftermath of its quarterly earnings release. The company returned to revenue growth with a 5.6% jump in 2011 sales, but all of that came from international markets. If the dollar remains strong, then currency headwinds could continue to play a role in holding J&J back.

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At the time thisarticle was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. You can follow him on Twitter here. The Motley Fool owns shares of Wal-Mart and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson, Home Depot, 3M, and Wal-Mart, as well as creating diagonal call positions on Johnson & Johnson, Wal-Mart, and 3M. 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 Fool has a disclosure policy.

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