The Dow Inches Higher, but Why Did General Electric Fall?

Wednesday was another solid day for the Dow Jones Industrials , which climbed 15 points to leave it just shy of its all-time record high. Even though the S&P 500 outperformed the Dow by just enough to set a new record of its own, the Dow generally benefited from strength in the financial sector. Yet General Electric fell almost 1%, leading the Dow's decliners and helping to prevent the Dow from reaching record levels for a seventh time in 2014. Let's take a closer look at General Electric and try to figure out why the Dow component fared poorly today.

Source: General Electric.

At first glance, today seemed like it should have been a good day for General Electric, as some positive news showed the success that the Dow component and global conglomerate has had worldwide. General Electric announced that the government of Equatorial Guinea had selected a group in which the company's power and water subsidiary will play a key role to install a solar grid system on an offshore island, providing technology to store energy collected from the grid. Although the project is small at just f5 megawatts, it gives General Electric a chance to showcase its technology in Africa, which has great potential for driving sales in the future for the company.

Source: General Electric.

Elsewhere in Africa, of much greater importance to General Electric were reports that the Angolan government would spend about $1 billion to purchase power generation equipment and locomotives in order to further the country's efforts to improve its infrastructure. With the deal financed by the U.S. Export-Import Bank, Angola's purchase represents just an initial part of what could become a huge set of projects for the growing African nation, whose energy reserves have helped it become prosperous and grow at an increasing pace. General Electric has maintained a presence in the African nation for nearly half a century, and given the Dow component's emphasis on energy, having exposure to Africa and its rising energy profile makes good business sense.

Still, General Electric shareholders are anxious about the fate of its proposed buyout of French giant Alstom. Alstom's presence in the energy industry is extensive, with hydroelectric turbines and smart-grid technology among the assets that would fit with General Electric's energy exposure the best. Yet some are critical that Alstom's stock is artificially underpriced, and the French government has responded nationalistically with calls to consider a competing offer from General Electric rival Siemens as being superior from a standpoint of French national interest.

General Electric plays a relatively small role in the Dow Jones Industrials, especially given its low share price. But from a psychological standpoint, the success that the Dow component has had in bouncing back from the financial crisis with a renewed emphasis on its energy and industrial businesses has been an inspiration to shareholders. If anything gets in the way of General Electric's growth, then the Dow Jones Industrials could suffer the consequences.

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