Why The Dow Rallied Today
Aug 6th 2012 10:08PM
Updated Aug 6th 2012 10:12PM
In a break from tradition, global and U.S. markets enjoyed a relatively quiet day today in the absence of any major macroeconomic news. U.S. markets bucked a trend today, rising at first, but fading slightly toward the end of the trading session. The Dow Jones Industrial Average (INDEX: ^DJI) closed the day up 21.3 points, for a gain of 0.2%. This marked the first Monday that the Dow traded higher since May. The S&P 500 also rose 0.2%, and briefly flirted with the 1400 mark that the index hadn't seen for nearly three months. The tech-oriented Nasdaq posted the strongest performance among major U.S. indexes, rallying 0.7%. The VIX (INDEX: ^VIX) , often referred to as the market's "fear gauge," also increased 2.0% during the trading period.
Around The Markets
Company-specific story lines dominated the day's news, none more prominently than Best Buy (NYS: BBY) , whose shares surged 13.3% after its former CEO, Richard Schulze, announced an unsolicited buyout offer at a sharp premium to the company's current share price. Considering that Schulze already owns around 20% of the company, the strong likelihood that someone will need to take a hatchet to Best Buy's business model, and the cushy premium with the bid, Schulze's offer seems quite tempting. However, the company called the bid "highly conditional."
In other corporate news, shares of household name Tyson Foods (NYS: TSN) plummeted 8.0%, as the company reduced its full-year guidance as a result of the brutal droughts affecting much of the U.S. agricultural industry. The company cited the drought as responsible for driving up feed costs. Although it gave no profit forecast, the company said that annual revenue should come in around $33 billion. Analysts expected $34 billion.
On the upgrade/downgrade front, shares of dividend powerhouse Annaly Capital (NYS: NLY) fell 2.6%, as FBR Capital downgraded the mortgage REIT to a sell. Investors have wondered lately about the safety of its prodigious payout (12.8% as of this writing), especially as interest rates can only go in one direction. Given its razor-thin current ratio of 0.1X, and the 71.1% decline in revenue that it's experienced over the last 12 months, these fears seem at least somewhat valid.
What It All Means
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The article Why The Dow Rallied Today originally appeared on Fool.com.Fool Andrew Tonner held no positions in any of the companies mentioned in this article at the time of publication. You can find Andrew and all his Foolish writing on Twitter at @Andrew Tonner.The Motley Fool owns shares of Best Buy and Annaly Capital Management. Motley Fool newsletter services have recommended buying shares of Annaly Capital Management. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter services free for 30 days.
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