Last Week's Big Dow Losers
Mar 2nd 2013 5:00PM
Updated Mar 3rd 2013 12:00PM
If you don't religiously follow the markets and are just seeing the weekly results for the first time, it would appear that this past week was simply a slight winner and nothing more. Easily beating the other two major indexes, the Dow Jones Industrial Average ended the week up 89 points, or 0.63%. Gaining 0.25%, the Nasdaq performed slightly better than the S&P 500, which rose a more modest 0.17%.
But in fact, the week was a real roller coaster, and it all started on Monday, when investors, fearing the outcome of the Italian elections, sent the Dow down 216 points. That was followed by two days in which the blue chip stocks rose 116 points and 175 points, respectively. By then the markets needed a little breather, and that caused Thursday to be a relatively quiet, as the Dow lost just 21 points. Then came Friday, the day the massive $85 billion in government spending cuts went into effect. Investors ended up adding 35 points after huge swings between positive and negative territory during the last trading session of the week.
But even though the Dow closed higher for the week, 11 of its components didn't, and two were lower by more than 1%. And considering the previous week, when seven of the 10 losers were down more than 2.4%, this week wasn't so bad.
Before we go through the Dow losers, let's look at the index's big winner of the week: Home Depot , which rose by 5.26% during the past five trading days. The biggest move higher came on Tuesday, after the company announced quarterly earnings the evening before. Earnings per share came in at $0.68 after analysts were expecting only $0.64. Revenue hit $18.25 billion while also crushing the $17.7 billion many were expecting. In Home Depot's earnings release, management also announced a 35% increase to the dividend and plans to buy back $17 billion worth of stock.
Also on Tuesday, the Case-Shiller Home Price Index reported that home prices rose 7.3% in 2012. There are now a number of economic indicators pointing toward a strong recovery in housing, and not only are we seeing the price increase, but the number of new homes being built is also rising. Any recovery here is great news for the U.S. economy as a whole, and for Home Depot shareholders in general.
The big losers
United Technologies stock declined by 0.39% over the past five trading days. The biggest hit, a 0.7% drop, came on Monday in reaction to a report from the previous Friday, which indicated that a crack was discovered in the engine of an F-35. The Pentagon then grounded all of the military's 51 F-35's until the cause was determined. The engines are built by United Technologies subsidiary Pratt & Whitney. The jet was cleared to continue flying on Thursday, when inspections revealed that no other planes showed signs of stress.
The F-35 is the Pentagon's most expensive weapons program, which is probably why one crack shut down the whole fleet of planes. But if this turns out to be an isolated incident, United Technologies shares should rebound easily.
Shares of Merck fell by 0.79% this week after a study released by JAMA Internal Medicine linked pancreatitis to the use of Merck's diabetes drug Januvia. The study showed that patients taking either Merck's Januvia or Byetta, also a diabetes drug made in a joint venture between AstraZeneca and Bristol-Myers Squibb, were more likely to develop pancreatitis, which also can lead to further health problems. As the number of U.S. diabetes cases continues to increase, finding a safe drug to treat the disease would help the big pharmaceutical players recoup lost revenue as blockbuster drugs continue to fall off the patent cliff.
And finally, for the second consecutive week in a row, Alcoa ended the week as the Dow's worst-performing stock. Two weeks ago, shares were down 7.29%. While this week wasn't quite that bad, shares did move lower by 2.31%. The company is facing some serious headwinds as the price of aluminum continues its multiyear decline, caused by overproduction and oversupply in China. The country's stockpiles of the metal have risen by nearly 50% in key markets and 30% throughout the country in just the past year. Also during that timeframe, the price of aluminum has dropped by 7.7% on the London Metal Exchange.
Alcoa has now fallen 2.76% year to date, making it the worst-performing Dow component of 2013.
Another stock making the losers' list for the second week in a row is UnitedHealth Group . After losing 4.97%, shares fell another 1.74% this past week and are now on the verge of hitting a 52-week low. Investors have been fleeing the insurance provider after the U.S. government released proposed Medicare Advantage rates for 2014. UnitedHealth's competitors have warned that profits will take a hit next year, and it seems investors are attempting to insure they don't lose money by selling the health-insurance industry.
Other Dow losers this week were General Electric, down 0.85%; Travelers, 0.39%; Caterpillar, 0.19%; Bank of America, 0.87%; Procter & Gamble, 0.64%; Cisco, 0.38%; and American Express, 0.32%.
More foolish insight
Materials industries are traditionally known for their high barriers to entry, and the aluminum industry is no exception. Representing 14.7% of 2011 global production in this highly consolidated industry, Alcoa is in prime position to take advantage of growth that some expect will lead to total industry revenue approaching $160 billion by 2017. Based on this and several other company-specific factors, Alcoa is certainly worth a closer look. For a Foolish investment perspective on this global giant simply click here to get started.
The article Last Week's Big Dow Losers originally appeared on Fool.com.Check back daily as Matt gives the rundown on the Dow's winners and losers of the day, or follow him on Twitter: @mthalman5513. Fool contributor Matt Thalman owns Bank of America. The Motley Fool recommends American Express, Cisco Systems, Procter & Gamble, and UnitedHealth Group and owns shares of Bank of America and General Electric. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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