The Dow Soars on Fed-Fueled Optimism
Jun 18th 2013 2:40PM
Updated Jun 18th 2013 3:40PM
The Federal Open Market Committee's meeting this week won't end until tomorrow, but don't tell the stock market that. Optimism surrounding the Fed's decision on stimulus bond-buying has buoyed the Dow Jones Industrial Average to a second straight day of triple-digit gains, sending the blue-chip index up more than 140 points by 2:25 p.m. EDT. Virtually every Dow member is in the green today, with several stocks up by more than 1%. Let's check out the stories you need to know.
Optimism reigns, but should you celebrate?
Wall Street's booming this week due to speculation that Fed Chairman Ben Bernanke will make it clear that quantitative easing will continue as normal, but don't let this mini bull run change your outlook. Sure, stimulus has been good for the economy at large, and Bernanke himself has warned that tapering bond-buying too quickly could put a dent in the U.S.' recovery. Yet stimulus does nothing to change the fundamentals of a business or stock, and while economic recovery has helped several sectors rise -- homebuilders in particular have taken off due to resurging confidence around the country -- basing stock decisions on the market's reactions to the Fed is a short-term, misguided move.
However, some of today's big risers have real momentum in their businesses. General Electric shares are leading the Dow, picking up 2.3% so far today, and that's no mere stimulus reaction. GE is reportedly hiring thousands of workers to develop an "industrial Internet" -- a network to link up industry and promote efficiency between suppliers and customers. Big data has garnered significant attention lately as companies try to unearth efficiency through technology, but GE's plan could capture significant savings for the company, according to CEO Jeff Immelt -- perhaps amounts in the billions.
The Dow's telecom stocks are on the upswing today as well. Verizon shares have surged 1.6%, while rival AT&T's stock has picked up 1.3%. Electronic publication PCMag released the results of a study on America's major networks yesterday, and AT&T ranked as the fastest 4G LTE network nationwide. It's a victory for AT&T, but not one the company should get used to.
After all, AT&T has seen its customer growth lag behind that of larger rival Verizon recently, and the company will have to improve reliability in order to close the gap and show a real advantage over its competitor. Further, Verizon led PCMag's study on reliability across the country. While Verizon lost the title of fastest network, the company is still well positioned to continue its leadership in the telecom space. Nonetheless, both Verizon and AT&T ranked ahead of rivals such as Sprint in the study, so the two should see their reign atop the industry continue unchallenged.
Finally, UnitedHealth Group shares are up 1.9% today to rank among the Dow's top stocks. UnitedHealth is positioned well for Obamacare's launch next year as the largest public insurer in the country, but cracks have started to show in the firm's armor. UnitedHealth has already announced that it won't participate in the first year of California's state-run individual-insurance market, and further concerns have arisen regarding the company's handling of a $20 billion award from the Pentagon this April to manage the Department of Defense's health care services. The DoD has criticized the company for delays in medical payments and benefits, and if the Pentagon demands reimbursement for that failure, UnitedHealth shareholders could take a hit. It's not reassuring news as we head into the murky future of health care reform.
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The article The Dow Soars on Fed-Fueled Optimism originally appeared on Fool.com.Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool owns shares of General Electric Company. 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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