Why Today's Dow Justifies Ignoring the Fed
Jun 19th 2013 2:35PM
Updated Jun 19th 2013 3:55PM
Stocks held flat for the entire day up until the Federal Open Market Committee's release this afternoon, when the Dow Jones Industrial Average dramatically plunged to session lows before rebounding just as fast. As of 2:30 p.m. EDT, the blue-chip index has lost a moderate 55 points after investors unleashed a furious sell-off in the wake of the Fed's announcement, and then a second wave of traders swooped in to buy. Most Dow stocks are in the red now, but should you be concerned? Let's check out what the Fed had to say -- and why the Dow's biggest movers are winning or losing today.
Volatility strikes again
All eyes have been on the Fed this week -- a few too many eyes, as short term-focused Wall Street traders have looked for cues from the central bank as to the future of quantitative easing. Surprisingly, the dramatic sell-off wasn't sparked by any change in the Fed's stimulus plan. On the contrary, the FOMC decided to continue bond-buying at its current $85 billion-a-month rate. It's another reminder that smart investors should focus on the fundamentals of businesses and stocks, rather than watch the movements of a frequently irrational market that has blown up over nothing today.
Hewlett-Packard has kept investors smiling today, up 1.1% so far to rank among the Dow's leaders. Shareholders will have to be patient with the company as it continues its turnaround plan, but HP's making moves to swing away from the downtrodden PC market. Former HP personal-computer chief Todd Bradley was reassigned as a vice president of strategic growth today, leaving the company's dwindling computer business to focus instead on growing the firm's geographic standing in nations such as China. While it's a bit of a disappointment for Bradley, HP's in desperate need of a shake-up in its PC business as it looks to transition to mobile and other higher-growth areas.
A number of other Dow stocks aren't faring as well today, and Verizon's the worst of the bunch, with shares down 1.5%. America's leading telecom company announced that it's weighing a potential entry into the Canadian market with a possible acquisition of Toronto-based wireless carrier Wind Mobile. Wind Mobile boasts more than 600,000 subscribers, and with the Canadian government pushing wireless competition in recent years, the purchase may not be too expensive for Verizon to expand north of the border. However, Verizon would likely have to bid against other Canadian suitors for the company, which could certainly drive the price of the deal higher.
Boeing's also losing out today, with shares down 0.9%. Despite the fall, the company announced strong news from the Paris Air Show when it said it had received customer commitments to purchase 102 of its 787-10 long-body Dreamliner aircraft in deals that could amount to $29 billion. For shareholders, the optimism surrounding the 787 after this year's earlier grounding is an assurance that Boeing's flagship plane is on the right course.
Fellow aerospace player United Technologies can't boast such good news, however. UTC's stock has fallen 1% after a U.S. district judge ordered the firm to pay $473 million for contract manipulation to win Air Force contracts back in the 1980s. A historical problem like this obviously won't affect UTC's business in a meaningful way going forward, but it's a financial penalty that will hurt regardless of its non-effect on the company's image.
Is Boeing living up to expectations?
Boeing is a major player in a multitrillion-dollar market in which the opportunities are massive. However, emerging competitors and the company's execution problems have investors wondering whether Boeing will live up to its shareholder responsibilities. The Fool's premium research report on the company provides investors with the must-know info on Boeing. They'll be updating the report as key news hits, so don't miss out -- simply click here now to claim your copy today.
The article Why Today's Dow Justifies Ignoring the Fed originally appeared on Fool.com.Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.