Why the Dow's on Hold Today
Dec 26th 2012 1:00PM
Updated Dec 26th 2012 1:02PM
Although President Obama cut his holiday vacation short, Congress will not be back in Washington until tomorrow, giving our ruling body's one less day to negotiate a deal to avoid the fiscal cliff. With the end of the year now just a few days away and no resolution in sight, investors seem reluctant to put new capital into the markets today. The Dow Jones Industrial Average is down 48 points, or 0.37%.
As very little happens in Washington today, the same thing goes for economic news. The only major data released this morning was the widely followed Case-Shiller Index, which tracks U.S. home prices. The index shows that on a year-to-year basis home prices have risen 4.3%, based on the most recent reading, which is for the month of October. But from September to October, prices fell by 0.1%. This month-over-month price decline broke a six-month winning streak for homes.
And with that, as of 12:40 pm EST, the Dow sits at 13,090, and of its 30 components, 21 of them are in the red today. Let's take a look at why a few of those losers are trading lower today.
The Dow losers
The Case-Shiller Index may be one factor causing shares of Home Depot to fall by 0.75% today. The home improvement store is closely tied to the health of the housing industry, and when negative data shows home prices are sliding, shares of Home Depot usually follow suit. Another reason could be that investors are selling the stock before the end of the year to lock in gains and ensure they only pay the current 15% tax on their capital gains. Home Depot's stock has risen 46% year-to-date and was one of the best performing Dow components of 2012.
Shares of United Technologies are also trading lower today by 0.51%. The company announced on Saturday that it would be divesting its UTC Power fuel cells unit. ClearEdge Power of Oregon will be purchasing the fuel cell business, and at this time the details of the transaction are unknown. Over the past few weeks, United Technologies has sold off a number of non-core business assets as the company attempts to put more focus on its core aerospace and commercial businesses. So the sale follows a trend, but the thing that makes the sale odd is its timing. With the end of the year so soon and a likely increase in taxes coming in 2013, the sale would have been more beneficial to shareholders if it had happened a few weeks or even months ago, since the transaction will not close until early 2013.
Another Dow component trading lower today is Walt Disney , which recently managed to make a deal to buy Lucasfilm for $4 billion and complete the transaction in 2012, possibly saving previous owner George Lucas millions of dollars in taxes. Shares of Disney are down 0.66% so far today. Trading volume for the stock is also extremely low this afternoon; while the average is 8.6 million shares, thus far only 1.5 million shares have traded hands.
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The article Why the Dow's on Hold Today originally appeared on Fool.com.Fool contributor Matt Thalman owns shares of Walt Disney. The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services recommend Walt Disney and The Home Depot. 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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