Greece and Bernanke Fail the Dow
Well, this certainly was a busy week. Greek elections had the markets primed on Monday, Congress threw its own "Dimon Jubilee," and Ben Bernanke proved the Federal Reserve was willing to provide up to, but no more than, the barest minimum amount of monetary stimulus.
Before we jump in, let's take a closer look at how the three major indexes ended up after five trading sessions.
Gain / Loss
Gain / Loss %
|Dow Jones Industrial Average (INDEX: ^DJI)||(119.09)||(0.92%)||12,627.20|
The major U.S. indexes ended up rather mixed. The Nasdaq posted a solid half-percent gain, while the S&P lost almost the same amount. The Dow's bottom-of-the-barrel performance was largely the result of a 2% to 3% decline in four of its five heaviest-weighted components. IBM makes up an astonishing 11% of the index -- and nearly a third when combined with Chevron, McDonald's, and Caterpillar.
Last Sunday's Greek elections, which reconfirmed the status quo, failed to boost the markets as some were anticipating, but had the far-leftist Syriza won and Greece's continued membership in the eurozone been in doubt, stocks would have fared substantially worse. Still, more austerity measures won't solve the problems facing Greece and other troubled countries like Spain. Symbols of the respective banking sectors, National Bank of Greece slumped 2% on the week while Banco Santandar (NYS: SAN) actually gained 2% even as Spain hit record high borrowing costs.
The long awaited Moody's downgrades to various "too big to fail" institutions and the Federal Reserve's meager $287 billion extension of Operation Twist did little to shake up Dow component JPMorgan Chase (NYS: JPM) as the index's top performer, up 4% for the week. In what is becoming a recurring series, CEO Jamie Dimon went to Washington to testify in front of Congress. He confidently announced that the bank should have a profitable quarter despite the "London Whale" trade that cost the firm anywhere from $2 billion and $5 billion.
Meanwhile, Operation Twist and its artificially low rates are affecting mortgage REITs such as Annaly Capital (NYS: NLY) that make money off collecting the difference in spreads. Shares of Annaly were still slightly up on the week, however, and its monster 13% yield remains intact.
Energy companies were hit hard this week after poor manufacturing data, both at home and in China, raised doubt about the global recovery. Oil prices have dropped below $80 per barrel for the first time in months, while the price at the pump is set to decline into the busy summer season. Kodiak Oil & Gas (NYS: KOG) tumbled 12% in response to falling commodity prices. Small exploration and production companies are more sensitive to commodity prices than are the big majors, because of their generally more expensive operations and limited ability to survive cyclical downturns.
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The article Greece and Bernanke Fail the Dow originally appeared on Fool.com.David Williamsonowns shares of Annaly Capital Management, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of JPMorgan Chase, IBM, and Annaly Capital Management.Motley Fool newsletter serviceshave recommended buying shares of Moody's, Annaly Capital Management, McDonald's, and Chevron and creating a synthetic long position in IBM. The Motley Fool has adisclosure policy. We Fools don't 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.