Why the Dow Is Roaring Back
After spending five straight trading sessions declining, earnings season brought the markets back in a big way yesterday. Alcoa's leadoff home run snapped the market's malaise; the prominent aluminum manufacturer hit its earnings out of the park with a $0.10 per share gain, blowing past estimates of a $0.04 cent per share loss. Today sees that momentum continue, shaking off rising unemployment claims, but a poor GDP report out of China could cause a traders to rethink their newfound bullishness.
With that in mind, let's take a closer look at how the major indexes are faring so far today and drill down on three stocks investors are eagerly anticipating quarterly results from.
Gain / Loss
Gain / Loss %
|Dow Jones Industrial Average (INDEX: ^DJI)||139.03||1.09%||12,994.42|
Source: Yahoo! Finance.
Before jumping into the earnings, let's touch on the Department of Justice's kerfuffle with Apple (NAS: AAPL) and several book publishers over pricing schemes. Amazon.com (NAS: AMZN) , which once controlled 90% of the e-book market, saw its dominance fall to about 60%, as the e-tailer couldn't undercut its competition on pricing thanks to an agency pricing approach that saw publishers set the price of content consistently across all sales channels.
With the Department of Justice possibly signaling that this pricing method is coming to an end, an emboldened Amazon announced cutting many e-book prices back down to $9.99, where had it originally set them before being forced by publishers to raise prices roughly 50% on average. Competitors like the embattled Barnes & Noble (NYS: BKS) , which hasn't seen a gain in 11 straight trading sessions, is down more than 5% today over concerns it can't keep up with Amazon's discounts. Amazon has to be careful not to totally destroy its competition. Moving so boldly and quickly could catch the attention of the Feds as well, since the government hates monopolies almost as much as price gouging.
Shifting to earnings, Dow component JPMorgan Chase (NYS: JPM) and fellow "too big to fail" megabank Wells Fargo both report prior to the market opening tomorrow morning, and both are currently lagging the broader indexes' gains. Analysts expect both to improve sequentially, but JPMorgan to underperform in year-over-year comparisons. Investment banking and trading revenue have been a recent challenge for the Wall Street titan, and a big bounce back this quarter is unlikely. Investors will want to pay attention to the strength of JPMorgan's lending operations, as they give additional insight into the strength of the economy.
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At the time this article was published David Williamsonholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of JPMorgan Chase, Apple, and Amazon.com. The Fool owns shares of and has created a covered strangle position in Wells Fargo.Motley Fool newsletter serviceshave recommended buying shares of Wells Fargo, Amazon.com, and Apple, as well as creating a bull call spread position in Apple and writing puts on Barnes & Noble. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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