Dow Futures

Three years ago, on March 9, 2009, the Dow Jones Industrial Average (INDEX: ^DJI  ) and the S&P 500 (INDEX: ^IXIC  ) both had a terrible, horrible, no-good, very bad day. Not only did both indexes dip during that dismal trading session, but both also recorded an all-time low for the new millennium.

Three years later, however, the story has evolved quite nicely. Just last week the Dow crossed the 13,000 mark, and this week, which marked the anniversary of that low point, investors took note as the indexes recorded nearly 100% gains during that three-year timespan.

In isolation, the Dow’s 13,000 mark and the anniversary could seem a bit arbitrary, particularly irrelevant to a buy-and-hold investor’s long-term strategy. At The Motley Fool, for example, we tend to obsess over individual stocks, learning everything we can about the fundamentals of a particular business. Foolish investors are largely indifferent to the market’s day-to-day movements.

Still, these landmark occasions can be a good time to reflect on the past, to consider our investment approach, and to check our ability to leave emotions at the door even during tumultuous market periods.

Fellow Fool Morgan Housel wrote an excellent article on the merits of the buy-and-hold strategy for investing even in the face of a non-stop news cycle that constantly toys with an investor’s emotions. In his article he noted that the past three years were quite possibly some of the best the market has ever witnessed. Ironic, perhaps, since multiple pundits on CNBC proclaimed that the market was far from a bottom and that President Obama was “conducting a War on Business” in the early days of March 2009.

If, in fact, Obama was conducting a so-called “War on Business,” I’d say he’s losing terribly. The Dow, which tracks the performance of some of the largest American companies, surged more than 95% over the past three years. Meanwhile, some of the best blue chips in the Dow doubled that return during the same time frame.

American Express was the runaway success story over the past few years, returning an average of 74.4% annually, which amounted to a total return of around 400%.

In addition, what a difference three years made for large industrial companies such as Caterpillar and General Electric. In Caterpillar’s case, the housing market’s collapse weighed heavily on demand for the company’s earth-moving heavy equipment. On the flipside, General Electric suffered immensely because of its close ties to the risky financial markets through its GE Capital unit.

Both Caterpillar and GE seem to be back on track, poised for even further gains from growing demand. Caterpillar’s CEO remarked recently that the company has posted the best volume increase in the United States since Harry Truman was president more than 50 years ago.

GE’s CEO, Jeff Immelt, was perhaps less bullish about the American economy, but he was especially optimistic about GE’s status as one of “America’s top exporters,” noting that the granddaddy of conglomerates will succeed because of its exposure to rapidly growing emerging markets. “Our company, because of our great people, can win,” he said. “And that is the American spirit.”

The question is, what’s in store for the next three years? Will the American economy continue to ramp up with another impressive growth period? Or should investors heed Immelt’s advice and look for a faster-growing economy like China or Brazil? If, in fact, you believe South America could be the next runaway growth story, The Motley Fool has identified an outstanding way to invest in this region. It’s an American company, with a focus on the hot Latin American market. Our chief investment officer explains why this company will succeed in a recent special report titled “The Motley Fool’s Top Stock for 2012.” The report’s available for only a limited time, so download it now!

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.

Some celebrated the Dow Jones (INDEX: ^DJI  ) finally closing above 13,000 yesterday, but another more-meaningful milestone was recently reached. Adjusted for dividends, the Dow is at an all-time high, surpassing its nominal record set in October 2007:

Source: S&P Capital IQ, using dividend-adjusted returns of SPDR Dow Jones Industrial ETF.

What does this mean? Like Dow 13,000, not much. It’s a psychological milestone that tells us nothing about value, opportunity, or what might happen next.

But what it does say loud and clear: Patient investors win. After the deepest recession since the Great Depression and a near collapse of the global financial system, it took just four years for investors who bought at the very top to recoup their losses. Those who scooped up bargains along the way have done far better.

How have you done over the past four years?

Some celebrated the Dow Jones (INDEX: ^DJI  ) finally closing above 13,000 yesterday, but another more-meaningful milestone was recently reached. Adjusted for dividends, the Dow is at an all-time high, surpassing its nominal record set in October 2007:

Source: S&P Capital IQ, using dividend-adjusted returns of SPDR Dow Jones Industrial ETF.

What does this mean? Like Dow 13,000, not much. It’s a psychological milestone that tells us nothing about value, opportunity, or what might happen next.

But what it does say loud and clear: Patient investors win. After the deepest recession since the Great Depression and a near collapse of the global financial system, it took just four years for investors who bought at the very top to recoup their losses. Those who scooped up bargains along the way have done far better.

How have you done over the past four years?

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.

Dow stocks can make good investments, but they aren’t necessarily your best bet. To learn about the one stock the Fool’s chief investment officer picked to crush the market, check out this free report: “The Motley Fool’s Top Stock for 2012.” Instant access is just a click away.

The Dow Jones Industrials (INDEX: ^DJI  ) pushed up 45.79 points today to close up 0.35% for the day. The S&P 500 was hot on its tail, posting a 0.23% gain for the day. The Nasdaq was the only index not invited to the party, closing down 0.27%.

On the whole, the markets have had a great opening to the year. The Nasdaq is up 13%, and the Dow is up 6%. Of course, the biggest news that threatens to shake the market out of its momentum is worries about the Greek debt crisis. Watch for key approvals and progress this Monday.

The biggest losers for the day were Bank of America (NYSE: BAC  ) , Alcoa (NYSE: AA  ) , and Hewlett-Packard (NYSE: HPQ  ) .

Take a look at the video below to see what news investors need to watch for next week. Enjoy the long weekend, and Fool on!

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How to play it
Watching the broad market each day is exciting, but investing doesn’t have to be gut-wrenching and stressful. If you’re in the mood to pick up a great company to buy for the long term, The Motley Fool has created a brand-new free report: “The Motley Fool’s Top Stock for 2012.” It features a company hand-selected by the Fool’s chief investment officer that has a strong future ahead of it. Get access to the report and find out the name of this legendary company. The report is free, but it won’t be forever, so check it out today.

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Austin Smith

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February 17, 2012
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Today was a mixed day overall for the markets, with the Dow Jones Industrial Average (INDEX: ^DJI  ) falling slightly.

The losers
Travelers (NYSE: TRV  ) was the biggest Dow loser, ending down 3.8%. America’s largest insurance company reported earnings that fell below analyst expectations. Travelers’ net income fell by 31% to $618 million, and earnings per share of $1.48 lagged analyst expectations of $1.54.

McDonald’s (NYSE: MCD  ) was the Dow’s second-biggest loser today, ending the day down 2.18%. McDonald’s was down despite reporting higher revenue and net income in its fourth quarter today. The company’s earnings of $1.33 per share beat analyst expectations of $1.30. So why did McDonald’s stock post its biggest decrease in four months after the company had such an impressive quarter? Investors are worried about the struggling global economy (and Europe in particular), as well as forecasts that foreign currency fluctuations would cut into profits this year.

Rounding out the three Dow losers today was Verizon (NYSE: VZ  ) , which ended the day down 1.59%. The second-largest U.S. phone company posted a fourth-quarter loss on previously announced pension charges. Taking out those charges, Verizon reported earnings per share of $0.52, still lower than analyst expectations of $0.60. Strong iPhone sales and smartphone demand from its wireless business drove revenues up 7.7% to $28.44 billion in its fourth quarter.   

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Today is going to be an exciting one for the Dow Jones Industrials Average (INDEX: ^DJI  ) . We have an impressive five components reporting earnings today, all of them looking to do so before market open. Here is a look and what to expect out of some of these market heavyweights today.

E.I. du Pont (NYSE: DD  ) will be the first to report today, and is expected to post earnings of $0.33 per share. This is sharply lower than their year ago earnings of $0.50 per share. The company is roughly flat over the last twelve months, but is one of the Dow’s stronger performers this year to date, posting a steady 8% gain. Look for any language about their titanium dioxide investments, or their recent Danisco acquisition as key drivers of the company going forward.

McDonald’s (NYSE: MCD  ) went on a tear to be the Dow’s top performing stock of 2011. Many shareholders (like myself) are hoping they can repeat their performance in 2012, but one analyst thinks the title will go to one banking stock instead. Analysts are expecting earnings of $1.29, up from $1.16 last year. McDonalds typically meets or slightly exceeds estimates, so look for them to do so again today.  

Johnson & Johnson (NYSE: JNJ  ) has started 2012 with a fizzle, ending down almost 1% when most of its Dow classmates have risen well into the black. Don’t let that short-term view paint your expectations, though — the company is expected to report $1.10 per share north of the $1.03 last year. If they perform as expected it will mark their 10th straight year-over-year gain in quarterly earnings per share. That’s awesome performance. Anand Chokkavelu has been bullish on them for some time for reasons like this. 

Verizon (NYSE: VZ  ) is actually expected to post a slight retraction from their year ago EPS, down to $0.53 from $0.54. Given how much spectrum the company has purchased recently, not to mention the virtual duopoly they have with AT&T, I’m not shaken by a slight pullback versus last year. This is a company that’s here for the long term, whether they happen to miss or beat today.

Travelers, the insurance mega-company, is tied with Cisco as new kids on the block. Both were added to the Dow in 2009. Analysts are expecting earnings of $1.52 per share, down from $1.89 per share.

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The Dow (INDEX: ^DJI  ) is up 0.5% today after several tech giants — IBM (NYSE: IBM  ) , Intel (Nasdaq: INTC  ) , and Microsoft (Nasdaq: MSFT  ) — reported strong earnings last night.

So what’s the big news from these tech biggies?

IBM reported 11% growth in its earnings per share and suggested a positive outlook for 2012. Operating margins were especially strong, spiking to 24.9% from 20.2% last quarter, or 24.3% in the fourth quarter last year.

Intel’s sales grew a whopping 21% in the fourth quarter. The rise of mobile devices, which aren’t Intel’s wheelhouse, has been a major concern for investors. But Intel’s earnings results should remind us that PC sales continue to flourish in emerging economies.

Microsoft’s margins are continuing to take hits, but the tech giant reported a decent 5% growth in sales and a more modest earnings increase. Xbox and CRM saw impressive numbers, and Microsoft looks to be playing the long game in search, as Bing’s market share climbed to 15.1%.

Hewlett-Packard (NYSE: HPQ  ) is also up big today. With its stock trading at just eight times earnings, it doesn’t take much to move it. HP posted sales declines in emerging economies last quarter, and the strong numbers coming out of PC-related companies could be a positive sign for the troubled PC maker.

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