Why the Dow Hit a 3-Month High
Last Friday, the Dow Jones Industrial Average closed at 13,076 points, finally topping 13,000 behind a late-week surge. Despite falling for the first four days this week, the Dow hit a three-month high today, up almost 250 points. The Dow popped 1.8% and the S&P 500 (INDEX: ^GSPC) surged 2% behind labor news.
The employment news, surprisingly, saw a direct contradiction between the two measures used to judge the vitality of the labor market. Unemployment actually increased slightly to 8.3%, and yet businesses surged past expectations by adding 163,000 nonfarm payrolls.
What gives? The disparity is due to an increase in active job seekers, and the overall unemployment rate includes farmers, which have had a rough time lately in our most recent drought.
Investors cheered the unexpectedly high payroll rise, which could mean higher earnings for companies down the road. But most importantly, the labor market finally showed some signs of life, giving investors reason for optimism. The ISM Services index also pleased analysts, rising to 52.6 after hitting 52.1 in June. Anything above 50 signals expansion in the services industry.
Every single Dow component traded up this morning, led by Kraft Foods' (NYS: KFT) 's 4.03% increase. The company slightly outpaced analyst earnings estimates yesterday, hitting $0.02 above EPS projections with $0.68 per share. Kraft's revenue also fell 4.3% compared to the year-ago quarter, but the company weathered the higher costs caused by the U.S. drought. Procter & Gamble (NYS: PG) also released earnings and impressed in a way similar to Kraft. The company's revenue slipped, but only 1.2% year over year, and its EPS beat analyst estimates at $0.82. The earnings also impressed investors and analysts alike, thanks to growing by 45%, and shares rose 3.46%.
Hewlett-Packard (NYS: HPQ) spiked 4.22%, but it's unclear why. News that its dividend yield had climbed over 3% might have attracted some interest, but that rise only came as a function of the stock's continued drop. Teradata did raise profit and revenue expectations for the year while posting a solid second quarter, perhaps providing a little optimism about the industry's vitality. It's also likely that investors simply worried about selling off too much of the stock -- shares are still down more than 30% on the year.
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The article Why the Dow Hit a 3-Month High originally appeared on Fool.com.Fool intern Will Chavey owns no shares of the stocks mentioned above. Motley Fool newsletter services have recommended buying shares of Teradata and Procter & Gamble. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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