Dow Rises on High Hopes for More Easy Money
Former Treasury Secretary and White House economic advisor Larry Summers will no longer be in the running to replace Ben Bernanke as Federal Reserve chairman. Most believed Summers would have been more aggressive than Bernanke in winding down the Fed's asset purchasing programs, so the announcement of his withdrawal late Sunday is leading stocks to trade higher today, with the Dow Jones Industrial Average up 0.85% as of 3:10 P.M. EDT. In fact, 28 of the 30 Dow components are up as of this writing, but one is really doing the heavy lifting on the index.
Boeing is up 3.8% today following a very bullish upgrade from Sterne Agee. The firm reiterated its "buy" rating and then upped its price target from $120 to $164. Peter Arment was the analyst making the call, citing the many positive catalysts for Boeing's stock, including the share repurchase program Boeing resumed in the second quarter. Arment also believes the company will improve its free cash flow over the next few years.
I've been bullish on Boeing for some time now. Its massive $410 billion backlog of orders provides a secure revenue stream even during rough times. Few companies can offer such revenue visibility, and to put that amount in perspective, its backlog equates to more than 4.5 times Boeing's 2013 sales estimate. Further, as Boeing ramps up production on its 787 Dreamliner, its margins and profitability will improve over the next few years.
Walt Disney is up 0.5% today. Shares have generally been trading upward since the company announced that it would increase its share buybacks to between $6 billion and $8 billion in 2014. The company typically buys back about $4 billion in stock annually. The CFO also mentioned that there would likely be limited spending on big films that aren't a part of established franchises. That's an allusion to Disney's expensive summer bust The Lone Ranger.
Outside the Dow today, General Motors is up almost 1% after unveiling its family of large SUVs late last week. It's an interesting move by the Detroit automaker, which has come a long ways from its unprofitable days. As you can see below, after the recessionary slump, sales of smaller crossover and utility vehicles like Ford's Escape have surged.
GM believes there is still pent-up demand in the large-SUV segment, and if it's correct, its all-new 2015 Tahoe and Suburban could boost profits next year. In addition to these new SUVs and full-size pickups, GM is planning to refresh, redesign, or replace 90% of its vehicle lineup by 2016. This could be a huge turning point for GM and its investors.
With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!
The article Dow Rises on High Hopes for More Easy Money originally appeared on Fool.com.Fool contributor Daniel Miller owns shares of General Motors. The Motley Fool recommends General Motors and Walt Disney. The Motley Fool owns shares of Walt Disney. 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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