Why the Dow Isn't Budging
In seemingly appropriate fashion, the markets traded lower to begin the last week of the worst month of the year for stocks. However, the Dow Jones Industrial Average (INDEX: ^DJI) has slowly fought its way back to a miniscule three-point gain as of 3:10 p.m. EDT.
With little domestic economic news slated for the day, traders remain focused on Europe, where evidence continues to mount of further economic contraction. It was revealed today, for example, that an index measuring the level of business confidence in Germany, Europe's biggest and strongest economy, fell for the fifth straight month in a row. Then there was a similar report that confidence in Dutch manufacturing dropped to -6.7% in September, down from 4.6% in August.
At the same time, the trickle of positive news from the domestic housing sector continues to gain momentum. Today, Lennar, the third-largest homebuilder by revenue, reported third-quarter profits that blew away analysts' estimates thanks to increased demand for new houses and the nascent housing recovery. According to Bloomberg Businessweek: "Purchases of new homes in the U.S. have begun to rebound as low mortgage rates help lure buyers amid a tight supply of existing properties."
With these two factors in mind, it should be no surprise that stocks are currently mixed in intraday trading.
The Dow's winners and losers
Among the Dow's biggest winners today is AT&T (NYS: T) , currently up more than 0.4%. There seems to be little doubt that the performance is tied to the success of the iPhone 5. In a statement released this morning, Apple (NAS: AAPL) chief executive Tim Cook revealed that the world's largest company by market capitalization set a record by selling more than 5 million units of its newest phone over the weekend. The device accounts for approximately two-thirds of the technology giant's sales.
According to Cook: "Demand for iPhone 5 has been incredible and we are working hard to get an iPhone 5 into the hands of every customer who wants one as quickly as possible." Shares in Apple are nevertheless lower on the day, dipping by 1.9%, as some analysts were predicting that as many as 8 million units would have sold by now.
Following Apple's lead, the three biggest losers on the Dow are all technology stocks: Hewlett-Packard (NYS: HPQ) , Intel (NAS: INTC) , and Microsoft are trading lower by 2.4%, 1.9%, and 1.6%, respectively. Beyond the generally bearish sentiment toward anything related to the personal-computer industry, these companies continue to suffer from the fear ignited at the beginning of September by Intel's downgraded forward revenue and earnings guidance.
The precise catalyst for today's decline, beyond Apple's ostensible disappointment, appears tied to a decision by Evercore Partners analyst Rob Cihra to cut his growth forecasts for the personal-computer industry to -4% in 2012 and zero in 2013, down from previous forecasts of zero this year and 4% next year. According to Cihra's research note: "Tablet cannibalization, weak macro, disappointing Ultrabooks, and inventory burn into [Windows 8] now make 2012 look on pace for the PC's biggest decline in 20 years, with limited reasons to expect next year recovers beyond just flat."
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