3 Things You Need to Know About the Big Economic News for These Stocks
The Dow Jones Industrial Average (INDEX: ^DJI) was flat this week, but that doesn't mean nothing big happened. In fact, this week saw several big winners and big losers amid a slew of important economic reports.
When you ignore all the noise and rhetoric and focus on the data, the problems facing the economy boil down to two basic issues. With so many consumers underemployed or overindebted, there just isn't enough spending on goods and services. When sales are weak, companies are reluctant to hire new workers, which further weakens consumer spending and makes it harder for people to repay their debts.
But this week saw several important updates. Here are three things you need to know.
First, the economy continues to improve on its most important measure -- employment. Unemployment rates decreased considerably in 2011, and we found out this week that unemployment claims have continued to decline. JPMorgan Chase (NYS: JPM) and Bank of America (NYS: BAC) , whose combined $1 trillion in consumer and residential loans are obviously affected by their customers' ability to repay debt, were the two best-performing Dow stocks this week.
What's going on? That brings us to our second point. People have a bit more money to spend, and that's what they're doing with it. Personal income rose 0.3% in January, and consumption increased 0.2%.The consumer confidence index in February shot up from 61.5 to 70.8.
Finally, the bad news is that much of the manufacturing industry is hitting a speed bump (except auto sales). Orders of durable goods fell a whopping 4% in January, helping to push Caterpillar (NYS: CAT) , Alcoa, and General Electric (NYS: GE) down 3%, 1.8%, and 1.4%, respectively. A big issue for the sector is that Brent crude prices have hit a four-year high amid concerns about a possible showdown with Iran. That's pushing up not just transportation costs but also the prices of all kinds of raw materials. It's probably a temporary problem, but expect this sector to remain rocky in the short term.
While threats like rising energy prices still exist, the U.S. economy is slowly but surely in the midst of a comeback. If you're looking for a group of solid stock ideas in this economic environment, I suggest you check out "Secure Your Future With 11 Rock-Solid Dividend Stocks," a special report from The Motley Fool. I invite you to grab a free copy to discover everything you need to know about these 11 generous dividend payers.
At the time this article was published Ilan Moscovitzdoesn't own shares of any company mentioned. The Motley Fool owns shares of JPMorgan Chase and Bank of America. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.