The Real Story Behind the Dow's Triple-Digit Jump


Look through news articles today, and you'll find plenty of mentions about how today's 138-point gain in the Dow Jones Industrials was driven almost solely by the Federal Reserve. Certainly, the Fed's quantitative easing policy has generated plenty of attention, as investors worry about whether the Fed's inevitable exit will destabilize the markets. But eventually, shareholders need to see positive results for the companies whose stock they own, and for that to happen, you need business prospects to improve.

That's why the real story behind today's gains come from the companies that released important news. Earlier today, I mentioned Merck's promising results for its early trial cancer treatment, but that wasn't the only one of the Dow's 28 winners today that made meaningful announcements today. Disney climbed more than 1% after it decided that U.S. consumers had the financial resources to pay higher prices to go to Disneyworld or Disneyland, with price increases ranging from 5% to almost 10%. Pricing power is a key element of business success, and in Disney's case, it reflects well on consumers' finances.

In the grand scheme of things, General Electric's settlement with the New York Attorney General over a high-interest credit card offered by GE Capital might not seem like a huge deal, given that anticipated refunds to customers are expected to be less than $2 million. But investors in big financial institutions will agree that the value of getting potential liability events behind a company is huge, especially when the customers involved include seniors and low-income patients who argued that they were pressured into accepting the credit card. Meanwhile, this allows GE to keep focusing on its core business, leaving the financial crisis behind it once and for all, and those prospects helped push the stock up 1.4% today.

Finally, Procter & Gamble rose more than 1% on reports that it's looking for a successor to A.G. Lafley, its recently named CEO. Lafley, who had held the top role at P&G for almost a decade, isn't expected to stay in the job for more than a few years, and the prospect of anything other than a seamless leadership change wasn't very attractive to investors. By restructuring its operations to bring four senior divisional executives into the line of succession, P&G will ensure it has leadership in place no matter what happens.

For GE, the recent financial crisis struck a blow, but management took advantage of the market's dip to make strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader. At the same time, you need to be aware of the threats to GE's portfolio. To help, we're offering comprehensive coverage for investors in a premium report on General Electric, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE today. To get started, click here 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 Procter & Gamble and Walt Disney and owns shares of General Electric and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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