Why the Dow Bounced Back This Week


After four straight weeks of significant losses, the Dow Jones Industrials (INDEX: ^DJI) came into this week desperately seeking a turnaround. Fortunately for bullish investors, that's exactly what it got, as the average posted gains in three of its four sessions during the holiday-shortened week and finished up more than 420 points. Skeptics may point to a lack of meaningful progress on major issues like the Europe debt crisis and the U.S. fiscal cliff, but some promising signs on those fronts were enough to start a relief rally as the markets enter the end-of-year home stretch.

Among the top performers for the week were Bank of America (NYS: BAC) and Verizon (NYS: VZ) , which rose roughly 8.5% and 6% respectively. For B of A, optimism about its improving capital position has generated a lot of hype about the stock, but the bank faces plenty of competition from stronger peers. Financials have tended to trade in parallel motion over the past several years, but as the financial crisis fades into memory, better banks will start surpassing weaker rivals, and it's far too early to tell whether B of A can recover fully from its near-death experience in 2008 and early 2009.

Verizon, on the other hand, bounced back from fears that Googleis thinking about creating its own mobile wireless network. Upstarts may pose long-term threats, but as an industry leader, Verizon has a huge head start with its network infrastructure already solidly in place. With huge dividends from its Verizon Wireless division and plenty of access to capital markets if needed, Verizon has a bright future by all indications.

Even in a positive market, the week did have some losers. Hewlett-Packard (NYS: HPQ) was the primary culprit, falling 3% after raising another huge scandal, this time surrounding its buyout of British software company Autonomy. With allegations that Autonomy misled HP about its accounting, HP just keeps getting hit while it's down, although the stock recovered strongly from its worst levels of the week.

Meanwhile, Intel (NAS: INTC) also fell, dropping 2% as CEO Paul Otellini announced that he will step down next spring. Three Fool analysts discussed the stock in a roundtable earlier this week and concluded that the death of the PC market has been greatly exaggerated. Nevertheless, Intel does need to break into the mobile market in a bigger way if it wants to bridge the gap to the next generation of technological advances.

What will next week bring?
The potential for a Santa Claus rally may help bolster the markets in the coming weeks, but a lot will depend on how individual stocks manage to perform. For instance, B of A has come a long way extremely quickly, but can it keep up the pace? Learn more about the most talked about bank out there in our
in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.

The article Why the Dow Bounced Back This Week originally appeared on Fool.com.

Fool contributor Dan Caplinger has no positions in the stocks mentioned above. The Motley Fool owns shares of Bank of America, Google, and Intel. Motley Fool newsletter services recommend Google and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

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