Why the Dow Gave Back Its Cyprus Gains


New investors are consistently surprised when long-hoped-for good news fails to produce a lasting jump in the stock market. This morning, U.S. investors woke up to news of a last-minute deal in Cyprus to avoid a banking collapse, with Cypriot leaders agreeing with the European Union, European Central Bank, and International Monetary Fund upon a "good-bank/bad-bank" scenario that will largely protect small depositors. Yet the relief rally proved short-lived, as plenty of other uncertainties will persist well into the future. By 10:50 a.m. EDT, the Dow Jones Industrial Average had given back its earlier 50-point gains and was actually down 31 points. The broader market did a little better, but the S&P 500 failed to answer the challenge, falling short of its own record highs.

But that didn't stop some stocks from posting more sizable gains. Among the best performers in the Dow was Home Depot , which rose 0.5%. Despite ups and downs in overall sentiment about the global economy, the one constant lately has been the housing industry's steepening path to a full recovery. Home Depot is best poised to take full advantage of that trend, having jumped to all-time highs on the strength of its popularity among homeowners and residential contractors alike.

Outside the Dow, Apollo Group soared more than 8% after announcing earnings. The for-profit education company that runs the University of Phoenix saw net income plunge nearly 80% from the year-ago quarter on a 13% drop in revenue, but even those ugly results were better than what analysts had expected. Yet given declining enrollment and the need for increased spending to bring students to class, Apollo could see more contraction in the future before things turn around.

Finally, VirnetX fell another 11.7% this morning, adding to massive losses from earlier this month after the company lost its patent infringement lawsuit against Cisco Systems . VirnetX had won similar cases against tech companies in the past, leading to high expectations that it would beat Cisco, but the unexpected loss has created a crisis of confidence in the stock. Unless VirnetX can demonstrate its ability to bounce back and move forward from the bad news, investors may well choose to continue fleeing the stock.

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The article Why the Dow Gave Back Its Cyprus Gains originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Cisco Systems and Home Depot. 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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