How Caterpillar Bulldozed the Dow Today


As much as U.S. investors tend to stay close to home with their portfolios, global events still play a major role in determining daily movements in the markets. With European Central Bank President Mario Draghi making somewhat pessimistic comments about the prospects for an economic recovery in the eurozone, U.S. investors took a break after strong recent gains. Moreover, sentiment appears to be weakening, as the latest readings from the American Association of Individual Investors showed bullish sentiment falling more than five percentage points, to a five-week low of 42.8%, with bearish sentiment similarly rising to a five-week high of 29.6%. The losses in the Dow Jones Industrials weren't severe, though, with the average finishing down 42 points.

Caterpillar was the big decliner in the Dow, falling more than 1.6%. With news that U.S. productivity fell 2% during the fourth quarter, the economically-sensitive construction giant responded the way it often does to negative data. Yet, despite concerns both within the company and among outside analysts that sluggish global growth may persist further into the future, Caterpillar's industry-leading status gives it the best chance to take advantage of a rebound in the global economy when it happens.

Elsewhere, iRobot plunged more than 13%, after disappointing investors with its first-quarter guidance. Despite posting a smaller-than-expected net loss of $0.21 per share for the quarter, the robot maker projected revenue for the first quarter that fell well below analysts' consensus figures. Given the company's healthy valuation, investors have been quick this earnings season to punish shortfalls in future revenue growth, and iRobot needs to demonstrate sustained strength in sales to justify its current multiple.

Finally, continuing the same trend, Green Mountain Coffee fell more than 5%, after giving downbeat guidance, as well. Revenue estimates for the current quarter of $1.01 billion to $1.04 billion fell short of the $1.06 billion that Wall Street was hoping for, even though the company posted better-than-expected earnings in its report. Fool contributor Jeremy Bowman believes that last year's smackdown in the stock still has investors gun-shy about perceived weakness, but noted that the stock's recovery from being down more than 10% earlier in the day is a sign of the company's resilience.

Will Caterpillar build itself up again?
Find out more about how Caterpillar is primed to take advantage of a global recovery by reading our premium report on the construction-equipment maker. Inside, our analyst goes through his case for whether Caterpillar is becoming a smart buy for value-seeking investors. Just click here to access it now.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Green Mountain Coffee and iRobot. 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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