Yesterday's 200-point rally for the Dow Jones Industrials (INDEX: ^DJI) was a nice break from the big declines since Election Day, but based on the market's first hour of trading, it looks like it may have been a one-day phenomenon. Despite foreclosures having fallen to a five-year low and housing starts climbing on the back of multifamily dwellings, rising concerns about the precarious finances of the Federal Housing Administration are tempering optimism on the housing-market front. As of 10:45 a.m. EST, the Dow is down 15 points, having recovered from earlier losses of 65 points.
The huge news of the morning came from Hewlett-Packard (NYS: HPQ) , whose stock plunged 12% after a disastrous quarterly earnings report. After spending more than $10 billion on British software company Autonomy just last year, HP announced an $8.8 billion write-off due to what it called "serious accounting improprieties" that Autonomy committed prior to the buyout. Squandering $9 billion on a botched deal for a company with a market cap of just $23 billion marks a huge failure in due diligence and just another example of HP's bad fortune in recent years.
Caterpillar (NYS: CAT) fell 0.85% after reporting that worldwide machinery sales over the past three months rose 8%, indicating better results in October. Asia-Pacific sales rose but saw slower growth than in previous periods, while its North America segment also experienced weaker growth. Until the entire global economy starts firing on all cylinders, Caterpillar's results will remain somewhat erratic.
Finally, defensive consumer stocks Procter & Gamble (NYS: PG) and Johnson & Johnson (NYS: JNJ) have both posted slight gains this morning. During troubled times for the overall stock market, it's typical to see these stocks climb. But both P&G and J&J have somewhat high valuations at the moment, suggesting that it may be ill-advised to rely too much on their resilience if a new downturn takes hold of the market.
Best defense: a good offense
Defensive stocks may be overpriced, but cyclical plays may be ideal after some declines. For instance, Caterpillar's products, service, and unparalleled brand strength combine to give it solid competitive advantages. But is Caterpillar a buy at current levels? Read all about Caterpillar's strengths and weaknesses in our brand-new report. Just click here to access it now.
The article Why the Dow's on the Defensive This Morning originally appeared on Fool.com.
Fool contributor Dan Caplinger has no positions in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services recommend Johnson & Johnson and Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.