Why the Dow Finished Higher This Week, and Facebook Didn't
It was an interesting week for the Dow Jones Industrial Average (INDEX: ^DJI) , which ebbed and flowed over the past five trading days to finish slightly in the black for the week. To no one's surprise, Europe was a main catalyst as investors continue to fear that Greek elections scheduled for June 17 could further push the country toward a euro exit. Contagion is a main part of the problem; the possibility of Greece leaving the euro has investors concerned about implications for larger European countries like Spain and Italy.
But it wasn't all bad news on the week, as some upbeat reports about the state of the U.S. economy helped overshadow problems in Europe. The Thomson Reuters/University of Michigan's consumer sentiment index rose to 79.3 in May from 76.4 in April, showing that consumers are the most confident they've been about the economy since October 2007. A couple of upbeat housing reports also helped push markets up this week; new home sales increased more than expected in April and housing prices improved as well.
Here's how the three major indices performed over the past five trading days:
|Dow Jones Industrial Average||+85.45 [0.69%]||12,454.83|
|S&P 500||+22.6 [1.74%]||1,317.82|
Turning to individual stocks, Home Depot (NYS: HD) was the Dow's largest gainer this week, finishing up 5.1%. The positive housing data certainly helped the home improvement retailer, as did a disappointing earnings report from main rival Lowe's. Home Depot has impressed investors by taking market share and growing same-store sales faster than Lowe's.
PC giant Hewlett-Packard (NYS: HPQ) was the third-biggest Dow gainer this week, up 4.1%, pushed higher after the company posted solid earnings and announced a massive restructuring program. HP reported non-GAAP earnings per share of $0.98, beating analyst estimates of $0.91. But it seems investors were most optimistic about the prospect of huge cost savings and increased organic growth at the company, as HP announced it would save $3 billion to $3.5 billion in fiscal year 2014 by eliminating 27,000 jobs.
Pfizer (NYS: PFE) was the Dow's biggest decliner this week, dropping 1.9%. The company announced Thursday that a U.S. health advisory panel had issued a split vote on a Pfizer drug designed to treat a rare neurodegenerative disease. Still, the pharmaceutical giant has slightly outperformed the Dow year-to-date, up 2.3%.
Outside the Dow, Facebook (NAS: FB) continues to capture investors' interest. The social-networking giant finished the week down 10.2%, but was able to rally midweek after dropping 11% on Monday. There remain serious questions about the company and its underwriters' handling of its IPO, leading financial regulators to announce that they will review the circumstances surrounding the botched IPO. There have been reports that analysts at the group of investment banks bringing the company public lowered estimates of Facebook's future revenue before the offering, and didn't disclose the information to the public. Facebook's stock has now declined 16.5% since the company went public last Friday.
Even beyond the terrible handling of its IPO, Facebook is facing some serious questions about its long-term prospects. Chief among them is the fact that the Internet advertising-based business model is a difficult one, and Facebook continues to struggle to make money off its mobile platform. That's why we've created a new report, "Forget Facebook -- Here's the Tech IPO You Should Be Buying," which details a much better social-media stock that has a longer runway for growth than Facebook. The report won't be available forever, so click here to get access today -- it's totally free.
At the time this article was published Brendan Byrnes owns no shares of any company mentioned above. The Motley Fool owns shares of Facebook.Motley Fool newsletter serviceshave recommended buying shares of Pfizer and The Home Depot. 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.