Why the Dow Likes Plan B
The Dow Jones Industrial Average rose moderately today, with a gain of 60 points, or 0.5%, as investors seemed to cheer House Speaker John Boehner's attempt to pass his "Plan B" to avert the fiscal cliff. At the time of writing, House members appeared to be moving toward a vote on the measure, which would keep Bush-era tax cuts for Americans making less than $1 million a year.
President Obama, on the other hand, has demanded that taxes be raised on those with incomes upwards of $250,000 a year. The move seems little more than a publicity ploy by Boehner after Obama threatened to veto the bill yesterday, and Senate Majority Leader Harry Reid also said he wouldn't introduce the measure in the Senate. Considering that, the market's reaction today seems puzzling, though some are hoping the gambit will force the political foes to compromise before 2013 arrives.
Macroeconomic reports today were mixed, as initial unemployment claims and leading indicator reports came in below expectations, but third-quarter GDP was revised up to 3.1% from 2.7%. The Philadelphia Fed's manufacturing index crushed estimates, likely on the recovery from Hurricane Sandy. Existing home sales for November also topped 5 million, beating estimates, as well.
In today's buyout news, we have a bit of a meta-deal, as NYSE Euronext , parent of the New York Stock Exchange and several other exchanges, agreed to be acquired by the Intercontinental Exchange for $8.2 billion. NYSE Euronext shares shot up 34% after the deal was announced.
In after-hours reports, shares of Research in Motion were down 10% at the time of this writing, after initially climbing following its earnings release. The drop apparently came on concerns about its service business and cash flow. The Blackberry maker posted an adjusted loss for the quarter of $0.22 a share, better than analyst estimates of $0.35, but its subscriber based declined for the for the first time from 80 million to 79 million. Revenues also fell by 5%.
Nike shares, meanwhile, jumped 5% in extended-hours trading, despite net income dropping 18% from a year ago. Sales improved by 7%, though, and investors had lowered their expectations due to the recession in Europe and the slowdown in China. Orders for Nike products rose 6% during the period, and profits of $1.14/share easily topped analyst projections of $1.
On the Dow today, most of the 30 components made gains, but Merck shares fell 3.4%, after its cholesterol drug, Tredaptive, failed to show that it significantly reduced heart disease in a recent study. Analysts are afraid that Merck and other drugmakers will struggle to make new cholesterol pharmaceuticals that are better than existing ones, namely because current drugs are already so effective.
Merck has taken a beating lately. Earlier in the month, CEO Ken Frazier said his company could be forced to cut back on R&D if the government lowered drug payments on Medicare, which scared investors, and now they're running, once again, after the failure of Tredaptive. Find out what's on the road ahead for Merck in our new premium research report all about the drugmaker. This analysis features an in-depth look at the opportunities and risks facing the company, as well as key areas for investors to watch. It even comes with a year's worth of updates as a free bonus. You can get started with this exciting new package today. All you have to do is click right here.
The article Why the Dow Likes Plan B originally appeared on Fool.com.Jeremy Bowman owns shares of Nike. The Motley Fool owns shares of Nike. Motley Fool newsletter services recommend Nike and NYSE Euronext. 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.
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