2 Key Reasons for the Dow's Jump Today
Mar 22nd 2013 6:00PM
Updated Mar 22nd 2013 6:06PM
The Dow Jones Industrials finished with a gain of 91 points. That wasn't quite enough to pull the average even for the week, as it ended with a loss for the week of two points. Surprisingly, that marks only the third weekly loss for the Dow so far this year. Meanwhile, broader large-cap benchmarks posted similar gains, while small-caps notched smaller advances.
Here's a look at the two main themes that played out in the stock market today:
In general, the stock market hates uncertainty. So, with lawmakers in Cyprus having failed throughout the day to come to a final resolution on how to address the island nation's need for a bailout, you would typically expect to have seen the U.S. stock market give up its gains going into what could be a tumultuous weekend in Europe. Yet, that's not at all what happened, as stocks largely sustained gains they built up throughout most of the day.
That's consistent with what we've seen throughout much of the year. When the worst weekly loss for the Dow so far in 2013 is a decline of just 17 points -- barely 0.1% -- it shows that investors are losing sight of the fact that stocks can, in fact ,go down. Increasingly, it looks like we could be setting up for a repeat of last year, during which time, big gains in the first quarter were followed by a substantial correction in the second quarter.
Safer stocks are lagging
On a winning day for the Dow, it's always interesting to look at the losers. The biggest decliner in the Dow was UnitedHealth Group , which fell more than 1%, as analysts downgraded rival Humana. The downgrade was based on continuing concern about the potential for big reimbursement-rate cuts for Medicare Advantage plans, which both Humana and UnitedHealth offer. Over the long term, however, it's hard not to see UnitedHealth as a relatively safe play, given the increasing need for health-care services from an aging population and the boost the company will get when Obamacare's individual mandate takes effect.
You can find some similarly safe plays among other minor losers today. Travelers dropped slightly, even though it stands to benefit from strong pricing power for its core property and casualty insurance offerings in the future in the wake of major disasters over the past two years. IBM fell 0.1%, despite having demonstrated continued strength in its relentless pursuit of its $20-per-share earnings target for 2015. And even though Coca-Cola is facing some difficulties in the U.S. from weak soda volume and obesity concerns, its global brand strength promises international growth for years to come.
When safer stocks don't participate in a rally, it suggests that investors are getting greedy. Being able to buy safe stocks cheaper is a plus in any market.
When President Obama was re-elected, shares of UnitedHealth and other health insurers fell immediately. Yet, Obamacare could become the biggest opportunity ever for the health-insurance industry. In our premium report on UnitedHealth, The Motley Fool takes a long term view, honing in on prospects for UnitedHealth in a post-Obamacare world. So don't miss out — simply click here now to claim your copy today.
The article 2 Key Reasons for the Dow's Jump Today originally appeared on Fool.com.Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Coca-Cola and UnitedHealth Group. The Motley Fool owns shares of IBM. 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.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.