How the "Unexpected" Rallied Today's Dow


As earnings season gets firmly under way, "expectations" mean quite a lot to the stock market. Accordingly, the news today that housing starts in December were markedly higher than expected drove the entire market up, and the Dow Jones Industrial Average ended 84 points higher, locking in gains of 0.63%, to close the day at 13,596.

Leading the Dow by virtue of a twisted form of "only on Wall Street" logic, chip maker Intel jumped 2.6%, as bulls expected today's earnings to be higher than expected. The after-hours announcement from Intel -- while beating forecasts -- didn't do so by "enough." After the bell, the stock gave up all its gains from the day, and then some, as profits plummeted 27% for the quarter. Intel did fall slightly short on revenue, but not by much.

Encouraged by positive housing numbers -- housing starts jumped 12.1% in December -- home-improvement retailer Home Depot joined Intel atop the Dow Thursday, rising 1.9%. The steadily-improving real estate market is part of the reason that Home Depot stock was the Dow's biggest support in 2012, accounting for more than 17% of the index's yearly 886-point gains -- 151.31/886.58 -- from the S&P 500 Dow Jones Year in Review Adobe file sent out the other day.

Bank of America , which jumped 2% yesterday in another case of heightened pre-earnings expectations, bit the dust, falling 4.2% today. It turns out that hopeful signs yesterday from industry peers that investment banking profits would surge failed to fully materialize, at least to the extent where they eclipsed the massive, multi-billion dollar writedowns that the bank took as a result of crisis-era mortgage lending.

Elsewhere in the markets, Chipotle Mexican Grill stock mounted a comeback from its dreadful 5.5% drop yesterday. Today's 3.3% rebound indicated confidence in Chipotle's newly announced decision to possibly increase prices in mid-2013, passing on the rising food costs investors worried about Wednesday to the consumer.

Today's earnings results serve to reinforce the fact that, while Intel's dominance in the PC microprocessor arena is almost unmatched, that market is maturing. This puts Intel in a precarious situation longer term if it can't find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Better yet, you'll continue to receive updates for an entire year. Click here now to learn more.

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John Divine has no position in any stocks mentioned. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.The Motley Fool recommends Chipotle Mexican Grill, Home Depot, and Intel. The Motley Fool owns shares of Bank of America, Chipotle Mexican Grill, and Intel. 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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