Dow Kicks Off Earnings Season on the Right Foot


It was a busy day on the market on the first full day of earnings season. Alcoa kicked off the reporting period on an up note after delivering earnings in line but better-than-expected revenues. The aluminum maker is often seen as a bellwether for the economy, and the Dow Jones Industrial Average (INDEX: ^DJI) rose 61 points, or 0.5%, in response. Despite trading up most of the day, however, Alcoa finished down 0.2%.

After falling for two straight days in the wake of numerous reports on problems with its new Dreamliner jet, Boeing (NYS: BA) rebounded strongly with gains of 3.6% today as it defended the 787. It issued a statement saying that it has "extreme confidence" in the new jet and its chief engineer said the plane was 100% safe. This announcement comes despite ongoing federal investigations into a battery fire in one of its planes on Monday. Just this week, a separate 787 experienced a fuel leak, and Nippon Airways canceled a 787 flight after problems with the plane's brakes. Expect continued volatility with the stock until this issue straightens out.

Bank of America (NYS: BAC) shares, meanwhile, tumbled 4.6% after Credit Suisse downgraded the stock from outperform to neutral with a largely valuation-based argument. Analyst Moshe Orenbuch also expressed concern about bad mortgages and future mortgage-related lawsuits. Shares of the financial giant had gained nearly 30% in just two months so perhaps the stock had become overbought.

Hewlett-Packard continued to make gains, climbing 3% on a research note that said the company could be worth $29 a share if broken up. As its core PC business shrivels up, the stock is now seen as a value play by many analysts. Its share price tumbled through most of 2012, but has now gained 35% since the Autonomy write-off.

Outside the Dow, Facebook (NAS: FB) topped $30 for the first time since July, climbing 5.3%, apparently in response to a mysterious press conference next week. The social network's invitations said simply, "Come and see what we're building," a message Wall Street seems to have interpreted as a new revenue-generating product.

The battle of Herbalife (NYS: HLF) heated up once again as fund manager Daniel Loeb took an 8% stake in the company. That stock had been battered just a few weeks ago after fellow fund manager Bill Ackman disclosed a short position in the stock and called the company a "pyramid scheme." Shares of the health supplement company have battled back since then and gained another 4.2%. Heavy trading is likely to continue tomorrow as Herbalife has scheduled an investor conference to respond to Ackman's charges. The SEC also announced an inquiry into the company today.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Bank of America and Facebook and has the following options: Long Jan 2014 $50 Calls on Herbalife. 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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