Why the Dow Bounced Back 130 Points Today
After yesterday's sluggish showing in which the Dow Jones Industrial Average lost 138 points on concerns over global manufacturing and slow hiring, blue chips rebounded Thursday, nearly erasing all of Wednesday's losses. Today's surge stemmed partially from a move that many economists already expected: the European Central Bank cut the benchmark refinancing rate from 0.75% to 0.5%, attempting to encourage borrowing to stimulate growth.
What economists didn't see coming was a sudden drop in claims for jobless benefits, which reached the lowest level in more than five years. Stocks responded by firing on all cylinders, as 90% of Dow components climbed. And none rose more rapidly than Cisco Systems , which added 1.8% after a serious stumble yesterday caused by concerns over rival Arista Networks' new super-fast data switch offering.
While technically the third largest gainer of the day, Chevron's considerable weight in the index makes the oil giant's 1.5% gains worthy of discussion. Chevron shares enjoyed a boost today after an Ontario judge blocked legal efforts by a law firm to seize some of Chevron's foreign assets -- an attempt based on an $18 billion ruling against the company in Ecuador.
Only two Dow components ended in the red, one of which was UnitedHealth Group . Slipping 0.4%, investors in UnitedHealth are dealing with the fact that the dynamics of the health-care industry are changing as "Obamacare" measures go into effect. The financial impact on companies like UnitedHealth is by no means clear, which makes for anxious shareholders.
Coca-Cola ended as the biggest loser in the Dow Thursday, despite only slumping 0.6%. Though there wasn't one obvious catalyst causing investors to sell off today, uproar over the name of the Rio de Janeiro stadium -- where the 2016 Olympics will be held -- could be drawing unwanted press to the soda giant. The disgraced former president of FIFA, Joao Havelange, took bribes during his time in power; Rio's stadium now bears his name. Though Coke had nothing to do with Havelange's impropriety, Coke began sponsoring FIFA during Havelange's tenure.
Coca-Cola's wide moat has helped provide its shareholders with superior gains in the past, but the company faces some new threats to its continued market dominance. The Motley Fool recently compiled a premium research report containing everything you need to know about Coca-Cola. If you own or are considering owning shares in the company, you'll want to click here now and get started!
The article Why the Dow Bounced Back 130 Points Today originally appeared on Fool.com.Fool contributor 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 Chevron, Cisco Systems, Coca-Cola, and UnitedHealth Group. 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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