Unexpected News From a Tech Giant Adds to the Dow's Choppy Trading
After snapping its six-day losing streak the Dow Jones Industrial Average was a little choppy in early trading, dropping early but fully recovering by noon EDT. Since then the Dow has been trading mostly flat, up just 25 points or 0.17%. Economic news was slow but U.S. new home sales came in 13.4% lower in July from the prior month. The seasonally adjusted annual rate of 394,000 was lower than expectations and notched the lowest sales rate in nine months. Only time will tell if this will create doubt among investors regarding the housing recovery.
In other news; It was a fairly quiet day for Dow components, except for the tech giant Microsoft which increased 6.67% as of 2:25 p.m. EDT. The surge was due to an unexpected announcement from CEO Steve Ballmer who plans to retire within next year. Even without a named successor the news was enough for Microsoft's stock price to come within a couple dollars of its 52-week high.
Like many businesses that thrived during the PC era, Microsoft still has challenges to face. Bullish investors still believe that Windows 8 will recover from its initial lukewarm response and help the Windows OS franchise compete with mobile devices. In addition to that, bulls expect Microsoft's strong server and tools business to continue gaining market share while the market continues its growth.
Intel Corporation is the world's largest semiconductor company but has struggled of late, down roughly 12% over the last year amid PC weakness. The key Dow component was increased to neutral from underweight at Piper Jaffray recently and is up 1% today. Bullish investors have faith that its heavy investment into R&D will help the company keep its position at the center of technology innovation. Intel currently owns roughly 80% of the microprocessor market and its huge budget for capital expenditures should allow it to maintain its cutting-edge technology and market share.
Home Depot reported a fantastic quarterly report earlier this week. The company posted a 17.2% increase in net earnings to $1.24 per share which easily beat estimates, and its comparable store sales in the U.S. surged 11.4%. Despite management even raising guidance for the year the stock has traded completely flat all week and is down 0.81% today, suggesting that the housing recovery may already be priced into the shares. In addition to that, today's weaker than expected new home sales could give investors reason to hesitate buying shares of the home improvement retailer.
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Fool contributor Daniel Miller has no position in any stocks mentioned. The Motley Fool recommends Home Depot and Intel. The Motley Fool owns shares of Intel and Microsoft. 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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