Why These 2 Dow Giants Fell While the Market Soared
For years, central banks have been the key to success in the stock market, and today's 127-point rise in the Dow Jones Industrials owes much to the European Central Bank's actions today. By reducing a key interest rate by a quarter-percentage point to 0.5%, the ECB joined the Fed, the Bank of Japan, and other central banks around the world in pushing the pedal to the metal to try to stimulate the global economy. Moreover, the U.S. saw good news on the employment front, as jobless claims fell to their lowest levels in five years, and the trade deficit narrowed.
Despite the positive news, a couple of Dow stocks posted declines. Coca-Cola lost 0.6%, pulling back from its highest levels in more than a decade. Ongoing worries about where the beverage giant will find new growth have lingered for a while, but if strength in emerging markets returns, then Coke stands to be among the biggest beneficiaries. Still, if a stimulus-led bull market resumes in earnest, then stocks that investors traditionally look to as defensive plays, such as Coca-Cola, could lag behind more economically sensitive companies.
Meanwhile, UnitedHealth dropped 0.4%. One big question that has arisen in light of the evolving implementation of Obamacare is the extent to which major health-insurance providers will offer coverage on state insurance exchanges. Given that the incentive of bringing in new premium revenue was supposed to offset more onerous policy requirements for UnitedHealth and other insurers, any failure to see increases in customer counts could leave the industry reeling from the new law.
Beyond the Dow, home-solar installation specialist SolarCity fell 3% after having been down as much as 14% near the open. The company suffered from an analyst downgrade that focused largely on near-term pressures to the solar installation business. Yet, the stock likely cut its losses due to the favorable long-term opinion from the analyst. Given that the industry has been moving toward an edge-power focus, SolarCity's business model remains an attractive way to play solar energy.
Finally, Boston Beer plunged 11% after reporting high expenses that wiped out gains in revenue. Between higher spending on promotions and advertising, and rising input costs, Boston Beer continues to face a highly competitive market, and will have to do its best to walk the line of catering to craft-beer enthusiasts while using its scale to its advantage.
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 These 2 Dow Giants Fell While the Market Soared 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 Boston Beer, Coca-Cola, and UnitedHealth Group. The Motley Fool owns shares of Boston Beer. 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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