Why the Dow Faces an Uphill Battle
Investors have pushed U.S. stock markets to record highs in the past week, as earnings season has opened fairly well and reasonably positive economic data further supports the notion that the economic expansion can continue despite some threats to global growth. Today, good news about the New York-area manufacturing industry has offset retail-sales growth that proved less robust than economists had hoped, and banking-industry earnings continued to demonstrate substantial growth, with Citigroup reporting a 42% rise in profit this morning. Yet investors seem to want even more before they'll push stocks sharply higher. As of 10:55 a.m. EDT, the Dow Jones Industrials are up only seven points, while broader market measures are similarly flat.
The Dow's movers today have mostly benefited from company-specific news, rather than broad trends. Boeing has advanced 2.4% after reports over the weekend said the investigations of a fire in one of Boeing's 787 Dreamliner aircraft didn't find any evidence of further problems with the plane's battery unit. With the 787 having been grounded for months earlier this year, investors sent the shares plunging on Friday on fears that further problems would create another setback. Even after this morning's gains, Boeing shares haven't quite gotten back to their levels from before the news hit.
On the downside, Verizon has fallen almost 1% after rival AT&T agreed to purchase Leap Wireless in a $1.2 billion deal that would pay Leap investors $15 per share. Leap has more than doubled to surpass that $15 level, suggesting that investors expect Verizon or another rival bidder to try to make a play for the prepaid-mobile company. Given the huge demand for wireless spectrum that has driven several past deals within the industry, Verizon must not take its status as the No. 1 U.S. wireless carrier for granted. Yet with shares of other spectrum-holding companies also on the rise, it looks as though AT&T just raised the bar in its own quest to retain its No. 2 status and find ways to grow in the increasingly saturated U.S. market. Watch closely to see whether any other bidders emerge for Leap in the days to come.
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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 owns shares of Citigroup. 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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