The Dow Jones Industrial Average (INDEX: ^DJI) and S&P 500 wrapped up the best January in the new millennium today, returning 4.4% and 3.4%, respectively. Not too shabby.
Even more impressive, the Nasdaq surged 8% during the month, partially due to the incredible earnings posted by tech giant Apple (NAS: AAPL) a week ago. Apple is the largest holding in the Nasdaq, and the company distanced itself as the most-valuable company in the U.S. today due to ExxonMobil's (NYS: XOM) relatively unexciting earnings announcement.
So, which Dow stocks delivered on the final day of the month? Let's take a look at the numbers:
Percent Gain Today
United Technologies (NYS: UTX)
Bank of America
Each of these Dow titans refused to let weak consumer-confidence data drag them down, and all three continued their upward trajectory for the year. After only a month, these stocks illustrate two key trends emerging in the broader market.
Banks are back
The financial sector, which lost its mojo during the recession, finally seems to be regaining strength. In 2011, an exchange-traded fund that tracks financial firms, the Financial Select Sector SPDR, lost over 20% of its value. So far in 2012, the same ETF is up over 8%.
Analysts have cited a few reasons for this rebound, including slightly better news from Europe (it might not collapse after all!), profitability gains for the Big Six banks, and a better understanding of the effects of Dodd-Frank reform. What we're seeing on the banking side is a return to a status quo more common during the last century. Incredibly, the largest banks are learning to contract, albeit uncomfortably, and shy away from the risky operations that were in full swing five years ago. A retreat to traditional banking practices could spell success for the battered institutions going forward.
America's emerging market
Another industry that's been gaining steam is good old-fashioned industrials. Earnings reports from some of America's largest manufacturing companies have been incredibly optimistic. The most interesting aspect of these reports? The U.S. has emerged as the bright spot for consistent, steady growth.
Compared to a shaky Europe and China's pull-back on new construction, the domestic playing field looks pretty attractive. According to the head of investor relations at equipment-maker Caterpillar (NYS: CAT) , an upswing in U.S. demand has helped equipment-maker experience its "best growth since Harry Truman was president." That's a pretty bold endorsement of the U.S. economy. The Commerce Department only reinforced that sentiment by announcing that durable-goods orders eclipsed projections for both November and December of last year. Industrial companies like Caterpillar and United Technologies appear poised for success in the year ahead.
Today's market movement might be meaningless in isolation, but the biggest movers paint a much broader picture for investors. In my opinion, the expectations for financial firms were tremendously low to start the year, and we will continue to see a rebound with each positive news report. I think the same can be said for industrials. The large conglomerates that seemed exposed to slower international growth have delivered solid results throughout the earnings season.
That being said, there will continue to be lots of surprises as we go forward. The best insight I have come across for investors to follow along is the Motley Fool's "Fourth-Quarter Earnings Report: 7 Stocks You'll Want to Watch." This sneak preview provides incredible insight from top analysts at the Fool, and it's available only for a short period of time. Thousands of our readers have tapped into this resource, so click here to access yours today.
At the time thisarticle was published Isaac Pino owns no shares in any of the companies mentioned in this article. Follow him on Twitter, where he goes by @TMFBoomer. The Motley Fool owns shares of Bank of America and Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple.Motley Fool newsletter serviceshave recommended creating a write covered strangle position in American Express. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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