Dow Futures

After falling in nine out of the last 10 days, the Dow Jones Industrials (INDEX: ^DJI  ) are finally taking a solid step forward this morning, rising almost half a percent as of 10:55 a.m. EDT. Some commentators pointed to positive economic news on new home sales, although the problems in Europe still hang over the stock market and will likely keep investors nervous at least until next month’s newly scheduled elections in Greece. Gold and oil both fell again, but the 10-year Treasury rate (INDEX: ^TNX  ) rose back above the 1.8% level in morning trade.

General Electric (NYSE: GE  ) was the big winner in the Dow, soaring more than 3% after announcing that its GE Capital unit would pay a special dividend of $4.5 billion to its corporate parent this year. The move marks another milestone in GE’s recovery from the financial crisis, as GE Capital stopped paying its dividend to GE back in 2009 in order to conserve cash.

On the down side, Microsoft (Nasdaq: MSFT  ) fell slightly despite a report from Forrester Research yesterday that said that the company is in the best position in the competition among tech giants to build a strong TV presence. Forrester pointed to the company’s Xbox platform, which Microsoft has used to pull in a substantial audience and which provides a valuable conduit for content delivery.

Finally, JPMorgan Chase (NYSE: JPM  ) was up almost 1% despite having shareholder lawsuits filed against it yesterday over its massive trading loss. Although there’s nothing surprising about the suits, JPMorgan investors should expect plenty of volatility in the coming months as the controversy works its way forward through the legal system as well as in the court of public opinion.

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The Dow Jones Industrials (INDEX: ^DJI  ) fell again today, closing down 125 points, or about 1%, on an increasingly bleak outlook in Europe. If May trading was a boxing match, the equity markets left Round 10 wobbling back to their corner. That’s not to say the Dow didn’t get in a couple of good punches, though. In fact, the Dow landed a nice jab from Merck (NYSE: MRK  ) and a solid cross from Cisco (Nasdaq: CSCO  ) today. Unfortunately, 27 of the 30 Dow components couldn’t handle the barrage of uppercuts coming out of Greece.

Even though the only “winning” going on today had more in line with Charlie Sheen than the 1996 Chicago Bulls, let’s go through some of the top performances.

Networking company Cisco overcame today’s broad-based weakness to post a 1.27% gain on the day, leading all Dow components. While the relative outperformance was a likely reversion to the mean following a sharp sell-off last week, it’s an encouraging sign that shares have perhaps found near-term support at current levels. Joining Cisco in positive territory today was pharmaceutical giant Merck, rising 0.45%. With Treasuries trading at record low yields, Merck’s hefty 4.4% dividend yield and health-care exposure provided a relatively defensive safe haven for investors looking for limited risk and yield.

Away from the Dow, shares of Groupon (Nasdaq: GRPN  ) soared 18.5% in anticipation of their first-quarter earnings announcement after the market closed. The results were encouraging, with revenue surging 89% versus analyst expectations of 79% growth and earnings per share of $0.02 coming in line with the consensus outlook. Better yet, revenue guidance for second quarter of $550 million to $590 million came in 5% above current estimates on the high end of the range. Will this news shed the daily-deals juggernaut of its “dog” status? Investors appear to think so, with shares up an additional mid-teens percentage in after-hours trading. At that rate, shares will begin tomorrow’s trading more than 35% above Friday’s closing price.

Also performing well today on encouraging news was a company best known for its share of negative headlines lately. Chesapeake Energy (NYSE: CHK  ) shares rose 4.8% on the day as investors took comfort that former large shareholder, notorious bargain hunter, and, perhaps most importantly, activist investor Carl Icahn has taken another large stake in the natural gas producer. Shareholders needed the reprieve, too, as shares took a nasty 14% hit Friday following liquidity concerns, which have since been addressed by a $3 billion loan from Goldman Sachs and Jefferies.

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The Dow Jones Industrials (INDEX: ^DJI  ) are looking eerily similar to the Seattle Mariners lately, winning one before falling for five straight days. Today the Dow dropped its fifth in a row because of a delayed reaction to the political uncertainty in Greece. The day started off with a massive sell-off but spent the afternoon climbing out of the depths before closing down 0.59%.

With the Greek elections wreaking havoc on the market and increasing uncertainty over a European rebound, the dollar gained ground on the euro as commodities took a swim. Crude prices failed to find support as the freefall continues, with June futures down 0.68% today.

On the day, Fossil (Nasdaq: FOSL  ) topped the list of the worst performers, as the company lost a third of its market value after cutting its growth outlook for the year on the heels of slowing European and Asian demand.

On the other hand, Disney (NYSE: DIS  ) , up 1.10%, turned in a strong back-to-back performance, with today’s performance stemming from the outstanding performance of The Avengers over the weekend and the release of the companies second-quarter adjusted earnings of $0.58 per share, which beat estimates by $0.03.

The Dow components hit the hardest were those in the volatile banking sector and the industrial sector. Bank of America and JPMorgan Chase (NYSE: JPM  ) , the latter down 0.96%, were directly affected by the upheaval in Greece and the increased likelihood that the country rejects austerity measures and defaults on its debts before being removed from the European Union. As for the industrials, Alcoa (NYSE: AA  ) , down 1.29%, saw a strong drop as austerity measures overseas are slowing GDP growth in Europe, coupled with a possible hard landing in China.

The look ahead
The big question is what tomorrow will have in store. Will the European debt issue continue to wreak havoc on the markets, or will the French and Greek elections be but ancillary characters in the week’s outcome? Regardless of tomorrow’s result or even next the month’s, the goal is always to find companies that are capable of continually outperforming the market. That’s why our top analysts have uncovered three companies set to dominate the world. This free report will show you three American companies that have incredible brand names and products that are deeply desired in emerging economies. Delve into this free report and reap the rewards as these companies storm the globe and truly become world-class outfits.

The Dow Jones Industrials (INDEX: ^DJI  ) jumped a full 1.2% this week, after several big-name companies reported strong earnings. Three in particular stood out.

Travelers
Last quarter, Travelers fell 4% after it reported weak underwriting and investment results. But this time, the insurance giant soared on indications by management that underwriting rates may finally be increasing after a long period of soft pricing. Combine this better pricing with (hopefully) fewer natural disasters that plagued the company last year, and we could see much better underwriting performance. Earnings per share also rose from $1.92 to $2.02, though that was due to a smaller share count; net income actually declined because of investment losses and a big tax gain last year.

Microsoft
On Thursday night, Microsoft reported that it earned $0.60 per share — $0.02 higher than analysts had forecasted. Although its small but-growing entertainment unit had a weak quarter, its larger divisions — Business, Windows, and Servers and Tools — all saw sales growth. That’s a good sign for the company, particularly with Windows 8 set to premiere later this year.

Wal-Mart
The discount retailer doesn’t report earnings until May, but there are several possible reasons it might have popped on Tuesday. The IMF raised its estimate for global GDP growth to 3.5% from 3.3%. The company also announced that it will be beefing up its India e-commerce team. Finally, Coca-Cola (NYSE: KO  ) reported strong earnings on 5% global volume growth, while Goldman Sachs raised its valuation estimate for Kraft — signs, albeit oblique, that investors could have taken as evidence for a good retail quarter.

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The Dow Jones Industrials (INDEX: ^DJI  ) fell a whopping 1% today after Friday’s disappointing jobs report. The Nasdaq and S&P 500 are down by similar amounts.

Last week, we found out that the unemployment rate fell to 8.2% after the economy added 120,000 jobs in March. That may sound like a lot, but it’s actually the lowest number since October and barely enough to keep up with population growth. In fact, the labor force participation rate dipped 0.1% to 63.8%.

The stock market had been on a roll after months of strong reports, but Friday’s report has caused some to revisit their economic crystal balls.

Bears will point to the idea that unusually warm weather may have given the economy a boost in recent months and that the economy is now stalling. Either that, or given the stock rally, high gas prices on account of tensions with Iran, and the deepening European recession, the downside risks to stocks outweigh their upside potential in the near term.

Economically sensitive stocks like Bank of America (NYSE: BAC  ) and Caterpillar (NYSE: CAT  ) got the worst of it, plunging to the tune of 3.3% and 2%, respectively. Even Disney (NYSE: DIS  ) and United Technologies (NYSE: UTX  ) — which are only about half as volatile as the other two seesaws — got hammered today in general market mayhem.

But it’s still too early to say our gradual recovery is stalling. This was, after all, just one month’s worth of data. The numbers could end up being revised upwards, or it could have been a one-month blip. And the news wasn’t all bad — the underemployment rate, which includes workers who can only find part-time positions, has been declining, indicating that demand is increasing and companies are finally beginning to fill full-time positions.

What’s more, layoffs of government workers may finally be starting to slow down. Over the past few years, 700,000 government workers have lost their jobs — about 2.5% of all public-sector workers. Belt-tightening at the federal, state, and local levels is one of the reasons why this downturn has been so severe. At the point we’re at now (30 months) after the 1981, 1990, and 2001 recessions, public-sector employment grew 1% to 3%, whereas it’s fallen 2.5% since the end of ours.

Finally, for long-term investors looking for bargains, a stock market sell-off isn’t all bad news. Corporate earnings could continue to soar in spite of the economy, as they have done for the past few years. That could mean continued stock gains for investors.

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You can blame today’s big drop in the Dow Jones Industrials (INDEX: ^DJI  ) — at 160 points and counting as of 1:45 p.m. EDT — on several things, ranging from European fears and the Federal Reserve’s announcement yesterday to simply a tired market that’s soared so far this year. But an equally important question for many investors is what impact the Dow’s plunge will have on the bond market.

In recent months, the Dow’s rise has come at the expense of bonds. The 10-year Treasury yield (INDEX: ^TNX  ) has risen from 1.87% at the beginning of 2012 to as high as 2.4% last month, as improving economic conditions seemed to hint at a coming end to the Fed’s low rate policies. The jump in the 30-year Treasury yield (INDEX: ^TYX  ) was even more extreme, with rates rising from 2.89% to 3.49% at their highs last month. Yet throughout this period, short-term rates have hardly budged, with three-month Treasury bills staying under 0.1%.

But over the past two days, we’ve seen the bond market react differently to the Dow’s drops. Yesterday, bond yields rose even as stocks fell, with expectations that the Fed would let rates rise, driving the stock market’s decline. Today, though, bond yields are moving back down, presumably as investors look for safe havens to protect themselves from a stock market correction.

Meanwhile, European problems could have a direct impact on bonds. It was a poor auction of government debt from Spain that helped reawaken fears of a sovereign-debt crisis, and those problems could well persist for quite a while. Already, both Banco Santander (NYSE: STD  ) and National Bank of Greece (NYSE: NBG  ) are close to revisiting their recent lows as a result of those fears, and even French banks are coming under pressure. So far, U.S. bonds have been largely unaffected, but a full-blown financial crisis would likely push investors into the perceived safety of Treasuries even as European bonds lose value.

What’s next for bonds depends a lot on how the economy plays out. A stronger recovery should boost rates. But any unexpected weakness could bring rates back down, making money for bond investors.

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A rising stock market continued to reflect the enthusiasm that investors have about the overall economy. Even though the Dow Jones Industrials (INDEX: ^DJI  ) finished up just 7 points, closing at 13,239, other parts of the stock market did much better. The small-cap Russell 2000 (INDEX: ^RUT  ) index jumped nearly 1%, and the Nasdaq and S&P also rose, but bond yields continued to climb as some now believe that the decades-long bull market in bonds is in danger of ending.

Some stocks didn’t get join in the fun on Monday. Let’s take a closer look at three of them.

Bank of America (NYSE: BAC  ) , down 2.7%
It would be easy to read something sinister into B of A’s performance today. But in reality, it’s probably just a break from the stock’s huge 2012 run.

Earlier today, B of A shares touched the $10 mark for the first time since last summer before falling back. For the stock to make further progress, it would be ideal for the company to show improvement in dealing with its legacy mortgage issues. Those are the biggest obstacles standing in the way of a full recovery for the bank.

Microsoft (Nasdaq: MSFT  ) , down 1.2%
Microsoft is giving up ground on a generally good day for tech stocks. But at least one analyst thinks this is a dip that investors should buy.

Hilliard Lyons stuck by its buy rating on Microsoft, raising its price target to $37 based on its expectation that Windows 8 will help the software giant integrate an ecosystem of its own. Between its Xbox game system, Office software, Bing search, and Windows Phone products, Microsoft has the capacity to build a one-stop experience. Whether it can execute or not remains to be seen … as the lack of interest in the shares today seems to suggest.

United Technologies (NYSE: UTX  ) , down 1.0%
I didn’t see any company-specific news pushing United Technologies down today. But one troubling trend could spell problems for the conglomerate and its defense-related segments going forward.

With Treasury yields on the rise, borrowing costs for the U.S. government could be in line to soar. That would put even more pressure on an already-burdened budget, which could prompt more defense cuts that could eventually hit United Tech and the defense contractors it does business with. Until the government can get its own balance sheet in order, rising rates will remain a threat.

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The Dow Jones Industrials (INDEX: ^DJI  ) is the one single measure of the stock market that the most people are familiar with. With its 30 component companies, the Dow has a manageable number of stocks while still representing most of the industries in the U.S. economy.

But because of a quirk in the way it’s calculated, the Dow doesn’t give every company the weight it deserves. Later in this article, I’ll talk about four companies that get short shrift from the Dow. But first, you need to understand why the Dow misses out on the full potential of some of its most promising companies.

Why the Dow has a weight problem
Behind every market benchmark is a set of procedures used to calculate it. The most important part of figuring out any index is determining how much weight to give to each of its component stocks.

Most market measures, including the S&P 500 and the Russell 2000, assign weights to their stocks based on market capitalization. So the stocks with the biggest market cap have the most influence on the index, while smaller stocks get less weight.

But the Dow is unusual in that it’s a price-weighted measure. So regardless of how big a company happens to be, the only thing that determines how much weight it gets in the Dow is what its share price happens to be. So stocks with high prices count the most in the Dow, while low-priced stocks have much less influence — even if their market caps happen to be extremely high.

4 stocks that you can’t ignore (even though the Dow does)
Unless you plan to invest directly in the Dow, though, its weighting mechanism isn’t important to you. You just want the best stocks you can find — regardless of their share prices. So I looked at four stocks that have plenty of potential but happen to have low-priced shares currently.

General Electric (NYSE: GE  )
Arguably the most diverse conglomerate in the U.S., GE has businesses that range from alternative energy and medical equipment to its now-minority interest in NBC Universal. GE fell out of favor during the financial crisis as its finance division suffered big losses that threatened the entire company.

Lately, though, GE has been firing on all cylinders. It’s working with a variety of partners on initiatives including health-care information technology sharing and LED production, and it also expects to expand its aviation business significantly this year. Yet with a share price of just $19, the stock has only about a 1% weighting in the Dow.

Intel (Nasdaq: INTC  )
This semiconductor giant has been successful for decades, riding on the surge in PC demand since the late 1980s. With in-house production facilities, Intel is insulated from third-party production problems that challenge some of its rivals.

With PCs giving way to mobile devices, Intel has had to answer a major threat. But with its Medfield mobile chip poised to find its way into tablets and smartphones later this year, Intel is positioning itself to join the mobile revolution. If it succeeds, then its roughly 1.5% weighting in the Dow won’t do the chip company justice.

Pfizer (NYSE: PFE  )
Pfizer has the largest market cap of any pure pharmaceutical company in the U.S., but by Dow standards, it gets almost no respect at all. It commands just a 1.25% weighting because of its share price around $21.50.

Like other pharma stocks, Pfizer is dealing with the setback of having lost patent protection on its blockbuster drug. But even with Lipitor open to generic competition, Pfizer has a reasonable pipeline of drugs to work on. Given the company’s huge size, Pfizer is in a much stronger position to bolster its future prospects than many of its peers.

Cisco (Nasdaq: CSCO  )
Cisco went through a rough patch a few years ago. Competitors seemed to gain the upper hand, and Cisco’s customer base of government agencies found itself facing big cash crunches that hamstrung IT spending. Moreover, the company made some mistakes with its failed foray into consumer electronics as it failed to defend its core business.

But more recently, Cisco has gotten its act together. With a narrowed focus that goes back to the company’s roots, Cisco’s share price has climbed steadily since the middle of 2011. But even with its gains, the stock makes up only about 1.2% of the Dow — less than a tenth of IBM‘s influence on the average.

Get built
The Dow is only as good as its component stocks, and sometimes, the Dow’s methodology obscures its best companies. Be sure to look beyond the Dow average itself to find its most promising stocks.

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Good news seemed to be everywhere, with Greek optimism over an accord to reduce the amount outstanding on its sovereign debt combining with a strong U.S. jobs report to generate optimism. Closing the week, the Dow Jones Industrials (INDEX: ^DJI  ) rose modestly, finishing up 14 points, to 12,922. The S&P 500 (INDEX: ^GSPC  ) climbed 5 points to finish at 1,371.

Still, not every stock joined the party. Here are three that posted some substantial losses on the day.

Hewlett-Packard (NYSE: HPQ  ) , down 1.9%
HP has a daunting task ahead of it: not just to define what it wants its new role in the technology industry to be, but also to make it actually happen. Today, a report from the New York Times revealed one part of HP’s strategic plan — building up its cloud-computing services.

With Amazon.com already delivering cloud services, HP certainly doesn’t have free rein to take over the industry. But with an emphasis on higher-value premium tools and applications over simply commoditized offerings, HP hopes to make the business less about competing on cost — where it would likely lose to Amazon — and more about providing a full-service experience.

If that works, then it could be one key to HP’s recovery. But based on investor reaction, HP faces a lot of skepticism.

Boeing (NYSE: BA  ) , down 1.1%
Boeing has a lot going on today. On one hand, the aerospace giant is competing well against Europe’s Airbus, with a huge edge in orders so far this year. Moreover, airline United Continental said that it managed to finance its order for Boeing 787 Dreamliners through the bond market, marking the first time an airline has sold bonds to fund a Dreamliner purchase.

But, according to Reuters, the World Trade Organization said that Boeing has benefited from billions of dollars in unfair subsidies. The ruling would rekindle a long dispute between Boeing and Airbus, both of which have had to defend against allegations of subsidies. The U.S. has pushed for sanctions of $7 billion to $10 billion against the European Union for its alleged aid to Airbus. If the WTO’s formal report due later this month confirms the Reuters report, then Boeing could face a long, drawn-out process that could distract from its core mission of getting its big backlog of orders filled.

ExxonMobil (NYSE: XOM  ) , down 0.6%
The tug of war between Big Oil and the government continues. Today, Exxon CEO Rex Tillerson said that although it needs government to help it develop many sources of energy, the best way the government can help companies innovate is by supporting research rather than using taxes and subsidies to cherry-pick certain portions of the industry.

Despite today’s small drop, if energy demand continues rising — and, with signs of economic strength, that seems likely — then Exxon should be poised to do well for the foreseeable future. Even with a possible short-term production slowdown, the long-term prospects for Exxon seem better than ever.

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Well, any thoughts that we’d make it through 2012 without a big down day got quashed today, as the stock market finally posted a major decline. The Dow Jones Industrials (INDEX: ^DJI  ) closed down 204 points, to 12,759, its first triple-digit loss of the year. The S&P 500 (INDEX: ^GSPC  ) also dropped sharply, falling 21 points, to 1,343, for its biggest single-session loss of the year.

I could find three Dow stocks that rose today, but some stocks held up a lot better than others. Let’s take a closer look at three of the better-performing stocks in the Dow today.

Intel (Nasdaq: INTC  ) , up 0.2%
Most people don’t see technology stocks as being particularly defensive. But good news can push a stock up, and that may be what helped Intel end up as the Dow’s single gainer today, with a small rise.

Intel released the latest version of its Xeon chip for servers today. The server chip is aimed squarely at the cloud-computing market, with better performance and greater energy efficiency than its previous offerings. With server manufacturers expected to get onboard with server platforms using the chips, the move should bolster Intel’s strength in the server-chip market against its rivals.

McDonald’s (NYSE: MCD  ) , down 0.1%
Big stock drops don’t scare McDonald’s investors. In case you don’t remember, the fast-food giant was one of the few stocks that managed to post a gain in the bear market year of 2008, when the S&P fell 37%.

Of course, with a big part of McDonald’s growth prospects coming from China, news of a potential slowdown in the economy of the world’s most-populous nation could have an impact on the company going forward. But if China follows through with plans to focus on developing a stronger internal consumer base for its economy, then the move could actually help McDonald’s — by giving it a better-developed market to serve.

Procter & Gamble (NYSE: PG  ) , down 0.2%
It’s not uncommon to find companies in defensive industries like consumer staples among top performers in down markets. P&G certainly meets the definition, with its strong stable of high-value brands commanding a presence in millions of households.

Today, the company once again was named as one of the most-admired businesses in the world, by Fortune magazine. Although P&G dropped from No. 5 last year to No. 9 this year, its ability to adapt to challenging markets and deal with the need to cut costs gave it the top rank in its industry.

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This week, the Dow Jones Industrials (INDEX: ^DJI  ) eclipsed 13,000 for the first time since May 2008, while the Nasdaq (INDEX: ^IXIC  ) broke through 3,000 for the first time in 11 years. A short time after hitting its milestone, however, the Dow retreated and finished about even for the five trading days. Immediately, headlines emerged claiming there was a psychological barrier weighing down the index at this level, that “some investors are worried about Dow 13,000.”

Why would that be the case? At this point, it’s unclear. After all, the Dow tracks the biggest, most financially stable companies, serves as a leading indicator for the economy, and has risen nearly 100% since hitting a 12-year low of 6,547 on March 9, 2009. Sure, on Wednesday, Ben Bernanke outlined a continued sluggish economic recovery, but for the most part the Federal Reserve chairman was optimistic about the United States and a gradually declining unemployment rate.

Perhaps more importantly, in his shareholder letter this week, the Oracle of Omaha, Warren Buffett, outlined an economy that was getting back on track. He even noted that the housing market would rebound as the supply-and-demand picture reversed course. In Buffett’s words:

Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over. And while “doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.

Bernanke didn’t phrase it in those terms, but Buffett never fails to get down to the brass tacks of the matter. After all, what twentysomething living on a futon wants a curfew?

Besides housing, however, Buffett shed some light on another sector that has been off limits for many investors over the past few years: banking. Coincidentally, Buffett’s endorsement of the banking sector might have bolstered the shares of JPMorgan Chase (NYSE: JPM  ) and Bank of America (NYSE: BAC  ) during the week. These two stocks were the biggest gainers on the Dow, while another Buffett bank holding was right there with them.

What did Buffett have to say about his bank holdings? Well, generally, that he likes them.

Specifically, he praised Jamie Dimon’s leadership at JPMorgan, noting that Dimon’s shareholder letter was one of his favorite reads. Buffett also pointed out that Bank of America has made excellent progress in cleaning house, fixing up its balance sheet, and nurturing a huge and attractive underlying business that will endure long after today’s problems are forgotten. Finally, Buffett waxed poetically about the “wonderful business” at Wells Fargo, a company so exceptionally managed that Buffett once claimed he would bet his entire net worth on its stock.

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On the whole, February was another strong month for stocks. The Dow Jones Industrials (INDEX: ^DJI  ) broke the 13,000 barrier, closing above the mark for the first time in more than three and a half years. Even beyond the Dow, several popular measures hit highs they hadn’t seen in years.

But not all of the Dow’s stocks helped the average push to new highs. Let’s look more closely at the five Dow stocks that performed the worst in February to see whether there are any pitfalls looming that could endanger the bull-market rally.

Hewlett-Packard (NYSE: HPQ  ) , down 9.5%
HP investors have let their patience wear thin. After suffering through years of questionable leadership, shareholders are counting on CEO Meg Whitman to come up with a viable turnaround plan — and do it quickly.

At least this month, they didn’t like what they saw. Whitman said she plans to tackle three huge areas: cloud computing, data management, and information security. Yet each one of those areas is a colossal undertaking in itself, let alone all three. Still, the key for HP lies in how it executes on its strategy — and if it can reverse previous miscues, HP could easily recover from here.

Wal-Mart (NYSE: WMT  ) , down 3.7%
Wal-Mart has long prided itself on offering low prices. But when prices get too low, investors get nervous.

Last month, Wal-Mart gave discouraging news on the earnings front. Although the retailer had good same-store sales — reversing a problem that has plagued the company for years — it had to offer big discounts during the holiday season. The resulting misses on earnings and margins, combined with downbeat guidance for 2012, have shareholders wondering whether the retail giant has lost its edge.

That said, Wal-Mart threw investors a bone earlier this week, boosting its dividend by 9%. That won’t be enough to allay all concerns, but it’s a nice reward for shareholders who stay the course.

Kraft Foods (NYSE: KFT  ) , down 0.6%
Kraft is largely in a holding pattern as it waits to split up its business into two parts later this year. The move will separate Kraft’s global snacks business from its lucrative North American grocery segment.

The problem lately is that the ongoing planning for the restructuring has kept Kraft on the sidelines at what could be a crucial moment. The controversy over Procter & Gamble and the breaking off of its deal to sell its Pringles division to Diamond Foods would have been a perfect situation for Kraft to take advantage of — had it had the latitude to do so. Still, the split should eventually allow both businesses to make more focused strategic moves to benefit their respective prospects.

Travelers, down 0.6%
Travelers had a lousy year in 2011. Big catastrophic events gave the company its least profitable year since 2004, and as a result, it announced in February that it will cut 1,400 jobs.

Obviously, a better weather year would allow Travelers to heal its wounds. But longer-term, low interest rates also pose a threat to returns on the insurer’s bond portfolio. Travelers needs several things to go its way so it can recover. For the most part, investors will just have to wait and see how the year goes.

Johnson & Johnson (NYSE: JNJ  ) , down 0.4%
Health-care giant J&J was mostly flat throughout the month. What the company needs is a catalyst to get it out of the doldrums.

One such catalyst could come from new management. J&J said CEO Bill Weldon will step down from his executive role in late April, giving way to medical-device-segment head Alex Gorsky. Although Weldon will remain as board chair, Gorsky has the experience necessary to draw customers back after a painful series of recalls. With a history of coming back from tough times, however, J&J looks like a good candidate to break out to the upside eventually.

Is March madness coming?
Of course, just because these stocks dropped in February doesn’t mean they’ll keep underperforming in the future. March could bring a big reversal of fortune for these companies — or a broader correction for the entire average, so add them to your watchlist of promising stocks by using the links next to their ticker symbols in this article.

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The stock market traded quietly on Friday, as it closed a tumultuous week that saw the Dow hit 13,000 for the first time in years. Recovering from much bigger losses, the Dow Jones Industrials (INDEX: ^DJI  ) closed down just three points, at 12,978.

Even with the lackluster day, some stocks managed to post decent gains. Let’s take a look at three of them.

AT&T (NYSE: T  ) , up 0.8%
For AT&T, it all comes down to what’s happening on the mobile front. Yesterday, the company said that it would put caps on its unlimited-data plans, forcing users to endure slower speeds if they go beyond the three-gigabyte level in any given month.

The move essentially puts grandfathered unlimited-data contracts on a par with newer tiered plans that explicitly limit data usage to three monthly gigabytes. As video and other high-bandwidth applications become more popular, AT&T and its peers will increasingly have to balance keeping high-volume, high-margin customers happy versus keeping its network running smoothly. Rival Verizon rose 0.6% on the news, as strengthening pricing power should benefit the entire industry.

JPMorgan Chase (NYSE: JPM  ) , up 0.6%
Fighting with the government is rarely a good idea. Making it happy, though, can pay dividends.

JPMorgan Chase learned today that the Treasury Department would pay back about $89 million in incentives for implementing the government’s Making Home Affordable Program by making favorable modifications to loan terms for struggling homeowners. The Treasury had withheld those incentives last year but now believes that the bank, along with Bank of America (NYSE: BAC  ) , had done enough to warrant receiving those funds.

Obviously, the amount involved is a drop in the bucket compared to the $25 billion settlement that banks made with federal and state governments last month. But getting the government back on the side of the banks would be a useful asset for JPMorgan Chase and its peers going forward.

Kraft Foods (NYSE: PG  ) , up 0.6%
Kraft rose, but not on any specific news. But fellow food stock Sara Lee ended up the day up 7% as the company gave further details on its planned spinoff of its coffee and tea division. Most exciting is the fact that Sara Lee shareholders will get a $3 special dividend when the spinoff takes place.

Excitement over spinoffs has heightened lately, with Kraft expecting to execute its own later this year. The big question still remains whether breaking a company apart truly creates value — or merely redistributes it.

Find more winners
You can find even more great investments beyond the Dow 30. We’ve got one stock we’re especially excited about, as the Fool’s chief investment officer picked it to crush the market. To learn more about it, check out this free report: “The Motley Fool’s Top Stock for 2012.” Instant access is just a click away.

A day after hitting 13,000 for the first time in years, the Dow Jones Industrials (INDEX: ^DJI  ) jumped out of the gate this morning as unexpected strength in U.S. figures for gross domestic product helped send the stock market higher. But the market is also nervous and looking for guidance from the Federal Reserve as Ben Bernanke begins testimony before Congress today. At 10:45 a.m. EST, the Dow dropped below the 13,000 level and was down 24 points to 12,981.

Most of the Dow’s tech contingent traded lower as well, as Intel (Nasdaq: INTC  ) and Hewlett-Packard both fell more than 1% despite the Nasdaq composite touching the 3,000 mark briefly before falling back. Everyone is focusing on Apple (Nasdaq: AAPL  ) eclipsing the $500 billion mark in market cap, but Intel does something the iGiant has been steadfastly unwilling to do: pay a dividend. Intel’s yield of more than 3% has attracted many income-oriented investors for whom Apple shares simply aren’t an option.

Caterpillar (NYSE: CAT  ) also gave up ground today after competitor Joy Global (NYSE: JOY  ) announced earnings. Joy Global posted revenue growth and earnings-per-share growth figures that exceeded 30% each, yet those figures came in below expectations. Nevertheless, it raised profit guidance for the year. That bodes well for Caterpillar, whose mining equipment business needs strength from miners in order to prosper.

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When it comes to investing, keeping things simple has a lot of appeal. That’s one reason the Dow Jones Industrials (INDEX: ^DJI  ) are so popular: It may not be perfect as a market benchmark, but it’s easy to understand. That in turn explains why the Dow-tracking ETF SPDR Diamonds (NYSE: DIA  ) have gathered more than $11 billion in assets under management — it’s a simple way to get exposure to all 30 stocks in the Dow in a single package.

Sometimes, though, it pays to get a little more complicated. That’s why I want to look at two alternative Dow-focused investments that offer a twist on traditional investing, in the hopes of discovering a superior play on the century-old market measure.

Adding bells and whistles
As fellow Fool Brian Richards touched on last week, Nuveen Investments has two closed-end funds that use the Dow as a starting point. The Dow 30 Premium & Dividend Income fund buys all 30 Dow stocks in the same proportion as the average. But it does a couple of things differently. First, it pays a dividend of about 7.6% that greatly exceeds even the highest-yielding stock in the average, thanks to a managed distribution policy that taps shareholder capital when necessary to finance dividend payments. Second, it uses a covered-call option strategy to generate some of that income.

Nuveen’s other fund, Dow 30 Enhanced Premium & Income, goes even further. In addition to writing covered calls, the fund can also use derivatives to boost its overall leverage. As a result, the Enhanced Premium fund does a better job of retaining full exposure to potential gains and losses than the Premium & Income fund. Under certain circumstances, the fund gives you even more exposure than the unadjusted Dow.

How they’ve done
Covered calls are a commonly used method for generating more income from a portfolio. The trade-off is simple: You get to keep whatever premium you receive by selling the call options, but with the risk that if the share price rises beyond the strike price on the option, you’ll miss out on additional appreciation in the stock.

Leverage-enhancing derivatives, on the other hand, have a mixed performance. Used to excess, they have led to big long-term tracking errors for highly leveraged ETFs pegged to daily performance. For instance, the bullish ProShares Ultra Dow 30 (NYSE: DDM  ) has lost 11% of its value in the past five years, while the bearish ProShares UltraShort Dow 30 (NYSE: DXD  ) has posted a whopping 66% loss.

For Premium & Dividend, the covered-call strategy has resulted in fairly good performance in net -asset value terms. In general, the fund has come close to matching upside performance in recent years while avoiding the full brunt of the Dow’s 2008 loss. For Enhanced Premium, the additional leverage has made returns more volatile, with bigger losses in 2008 but larger gains during the subsequent recovery. Overall, it hasn’t suffered the same fate as daily return-targeting leveraged ETFs.

Are these closed-ends for you?
One thing to remember about closed-end funds is that actual returns on the shares don’t match up with the net-asset value returns. Share prices jumped way faster in 2009 only to languish behind NAV performance in 2010 and 2011. Since you can’t cash out at NAV, you have to be ready to accept whatever premium or discount to NAV happens to apply when you want to sell.

Right now, though, both funds are available at a discount to NAV. That’s fairly rare, as the funds have traded at premiums during long stretches of their histories. If you think that could happen again, then you could get some extra returns compared to the Dow’s performance. However, you’ll have to pay a fairly high expense ratio to get access — currently around 1%.

Closed-end funds aren’t for everyone. But if you’re looking to invest in the Dow but want a different angle than just a plain-vanilla ETF, these Nuveen offerings are worth a closer look.

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In another cliffhanger, the Dow Jones Industrials (INDEX: ^DJI  ) spent much of the day above the 13,000 level before finally falling back. News of some details on Greece’s debt restructuring made it clear exactly how massive an undertaking it will be and raised some concerns about the impact it could have on the entire European economy. The Dow ended up closing down 2 points to 12,983, although the S&P 500 set a multiyear high, joining its peers over recent weeks.

Earlier today, I looked at three Dow stocks that turned out to be among the top performers today. So let me turn instead to some other gainers for Friday.

Pfizer (NYSE: PFE  ) , up 0.7%
Drug giant Pfizer is in the process of trying to sell off its infant nutrition unit to focus more on its core business. Reports surfaced early today that Mead Johnson Nutrition, itself a spinoff from Bristol-Myers Squibb, plans to team up with France’s Danone to make a bid for the business. With Nestle already expected to participate, a bidding war could be great news for Pfizer.

One potential hurdle is concentration in the baby formula market, which could raise anti-competitive concerns. With bids due in early March, you won’t have to wait long to find out what happens next.

Procter & Gamble (NYSE: PG  ) , up 0.4%
The news wasn’t so bright at consumer goods giant P&G. The company announced that it will nix 5,700 jobs as one component of a cost-cutting plan expected to try to trim as much as $10 billion. The cuts will represent a 10% drop in P&G’s non-manufacturing job base.

From an investing standpoint, the move could help P&G be more competitive and boost shares. But as just another example of how this economic recovery hasn’t been as supportive of new jobs as previous ones, P&G’s news could fuel more criticism of government efforts to boost the economy, especially in this election year.

ExxonMobil (NYSE: XOM  ) , up 0.4%
Overall, energy stocks got a boost from higher oil prices. But Exxon had particularly good news of its own.

The company said that it has discovered huge quantities of natural gas in an offshore find near the cost of Tanzania. Working with Statoil (NYSE: STO  ) , Exxon’s analysis suggests a find of up to 5 trillion cubic feet of gas. With the east African nation well-placed to serve Asian markets, the prospect of exporting liquefied natural gas could spell new prosperity for the region.

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Everyone’s paying attention to see whether the Dow Jones Industrials (INDEX: ^DJI  ) will finally close above 13,000 for the first time in four years. At around 1:45 p.m. EST, the Dow was hanging just below that level, rising just three points to 12,988. The slight move up comes despite some worries about falling new-home sales and rising gasoline prices.

Among Dow stocks, American Express (NYSE: AXP  ) climbed by nearly 1%. The company didn’t come out with any news today, but it did file its 2011 annual report with the SEC. A quick glance at the year shows some promising numbers, with net income up 22% to $4.9 billion and continuing strong returns on equity. As credit performance has improved, a rising economy has also led to increases in spending. Yet as Fool blogger Christopher French reminds us, AmEx got its last antitrust settlement payments from competitors Visa (NYSE: V  ) and MasterCard in 2011, and so it will need to face the two card-network giants on a more even playing field going forward.

United Technologies (NYSE: UTX  ) also climbed about 1%. Fool industrials analyst Brendan Byrnes discussed the company today, highlighting its exposure to emerging markets. Some have big concerns about United Tech’s defense business, but commercial aviation is a fast-growing segment with plenty of future potential — potential that the company’s buyout of Goodrich should build on.

Finally, Chevron (NYSE: CVX  ) rose about 0.7%. Oil prices are on the rise once more, but the company also said yesterday that it was considering building an ethylene plant through its joint venture with ConocoPhillips to take advantage of plentiful shale gas.

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It’s always amusing when the stock market gets close to big, round numbers. In the latest go-round in the flirting contest between the Dow Jones Industrials (INDEX: ^DJI  ) and the 13,000 level, the market measure got another step closer, finishing the day up 46 points to 12,985 — another multiyear closing high.

But many stocks missed out on the fun. Let’s take a closer look at three of the worst performers in the Dow today.

Hewlett-Packard (NYSE: HPQ  ) , down 6.5%
The biggest loser by far in the Dow today was Hewlett-Packard, which reported earnings last night. From the stock’s reaction, you’d think the news was universally bad, but as usual, the story at HP is a bit more complicated.

Sales and earnings both fell year over year, and the company issued disappointing guidance for the coming quarter as well. It’s no shock that HP’s legacy PC business was weak, but the company also posted sales declines in its systems and server businesses. It’s increasingly apparent that HP needs to stress its software and services segments — areas that are actually providing growth — to have a chance at avoiding the fate of commodity PC makers.

Pfizer (NYSE: PFE  ) , down 1.5%
Pfizer faces many of the same economic challenges as its drugmaking peers and other large companies in general. But amid patent cliffs and U.S. health-care reform, one consideration many have ignored is European budget cutting.

With European governments looking at various austerity measures, Pfizer and other pharmaceutical companies could see pricing pressure from the Continent. Although Pfizer isn’t likely to get hurt as much as European rivals Novartis (NYSE: NVS  ) and AstraZeneca, budget cutting could still represent yet another hurdle in Pfizer’s strategy to maintain profitability after the loss of patent protection on Lipitor.

United Technologies (NYSE: UTX  ) , down 0.6%
Another sector having to deal with budget cutting is defense. But the news hitting United Technologies today has more to do with the guidance it gave today.

Strangely, one would have thought the stock would move up. United Tech boosted its earnings-per-share outlook by a dime to $5.40 to $5.60 per share. It also said that it wouldn’t have to issue as much new stock to close on its acquisition of Goodrich, which it expects to complete around the middle of the year. Yet longer-term, looming concerns about defense budgets have weighed on the stock for months, and until there’s a final resolution — something that’s difficult to foresee in an election year — investors may remain nervous.

What will Friday bring?
These stocks missed out on today’s jump in the Dow, but who knows what will happen tomorrow? If you invest for the long haul, don’t get hung up in all the day-to-day meanderings of the market. Instead, read The Motley Fool’s latest special report and learn the names of three stocks that you can ride to riches. The report is free — but don’t wait: Read it today.

Following a somewhat momentous day for the stock market, investors appear to be taking a breather today. After making a brief up-move yesterday to challenge the 13,000 mark, the Dow Jones Industrials (INDEX: ^DJI  ) were down 12 points at around 2 p.m. EST to 12,953.

Among Dow stocks, Wal-Mart (NYSE: WMT  ) was particularly weak, falling another 2% after shedding more than 4% yesterday following its disappointing earnings report. The retailer saw a nice jump in sales, but in order to get them, Wal-Mart had to lower prices aggressively during the holiday season, sacrificing profit margins. Until the discount giant can establish pricing power, investors may remain leery of making big bets on Wal-Mart.

Intel (Nasdaq: INTC  ) fell 1.5% after Dell reported weak earnings results. Despite making a forecast for 2012 that exceeded consensus estimates, Dell is still struggling to move beyond its commodity-PC business into the higher-end enterprise equipment and services business. Analysts were quick to downgrade Dell, whose shares lost almost 6%. The collateral damage on Intel reflects the chip giant’s domination of the PC market, as concerns about the PC industry generally reflect on Intel’s future prospects as well.

Finally, 3M (NYSE: MMM  ) rose slightly in early afternoon trade. The company announced a partnership with Chesapeake Energy (NYSE: CHK  ) to produce more cost-effective, higher-performance fuel tanks for vehicles that run on compressed natural gas. For Chesapeake, the benefits are obvious, as any incentive to use more natural gas should help the energy producer. But the move also helps 3M bolster its presence in the alternative-energy market.

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Nearly all of the members of the Dow Jones Industrials (INDEX: ^DJI  ) have already told us about how their fourth quarters went. But in the coming week, we’ll hear from four of the last Dow components to report and get their takes on the state of the overall economy.

With the Dow at multiyear highs, investors are optimistic. Any contrary news from these four stocks could be a big surprise. Let’s take a closer look at the four companies reporting earnings early this week.

Wal-Mart (NYSE: WMT  )
At first glance, Wal-Mart seems to be on top of the world. Analysts expect it to report its 12th straight quarter of growing earnings per share, with estimated profit of $1.45 per share representing a potential record for the company.

But despite its good earnings record, Wal-Mart has struggled to keep sales up. Just last quarter, the retailer broke a long streak of declining same-store sales. What investors will look for, though, is exactly how the holiday season went and the extent to which Wal-Mart had to make sacrifices on profit margin to move its merchandise. Without strong numbers, Wal-Mart could continue to worry investors for the foreseeable future.

Home Depot (NYSE: HD  )
By contrast, you might expect Home Depot to be coming out of a long stretch of bad performance. With the housing market having been in the dumps for years, home improvement might seem like a bad place to be.

But Home Depot appears poised to post its ninth straight improvement in quarterly earnings, and its stock has already put in some stellar performance in recent months. As often happens, the stock appears to have anticipated the recent turnaround in the housing market, and as positive data starts to pour in, the company could see even more success. In particular, the settlement between states and mortgage lenders could clear the way for thousands of foreclosures to go forward, putting more supply on the market and driving up demand for materials to renovate those properties after they’re sold. An economic reversal could destroy that bull argument, but for now, Home Depot looks pretty compelling.

Kraft Foods (NYSE: KFT  )
Kraft can’t claim a long string of better earnings results, but it can expect decent growth from year-ago levels. Analysts expect earnings of $0.57 per share Tuesday, up from $0.46 in 2010′s fourth quarter.

But more important than its coming earnings will be whatever news Kraft gives about its upcoming spinoff. The recent Diamond Foods scandal has thrust snack companies into the limelight, which puts Kraft’s global snacks business in an extremely strong position to try to make strategic moves to keep up with its competitors. Meanwhile, the higher-margin U.S. grocery business could get some attention from investors who prefer a more conservative play on domestic growth. Shares are already up sharply in advance of the spinoff, so bad news could bring swift retribution to the stock.

Hewlett-Packard (NYSE: HPQ  )
HP comes into earnings season expecting to post greatly reduced earnings. The big question for HP, however, is how the latest in a long string of CEOs is doing in her turn at the reins.

Meg Whitman has tried to reassure investors and customers alike that the company will be there to stand behind its products. HP won’t stop selling computers, but it is interested in figuring out how to boost its growth by trying to make the most of its software business. More than anything, Whitman needs to act like the leader that HP simply hasn’t had for a while. With the stock at bargain prices, even minor successes should bring rewards to patient shareholders.

Looking beyond the next quarter
Even after all the Dow companies post their earnings, it won’t be time to give up. Often, what happens between quarterly reports holds the key to understanding whether a company will succeed or fail in the long run.

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