Caterpillar Inc. (CAT) Picks Up Steam as the Dow Jones Industrial Average (^DJI) Ends the Week in the Green

Page 1 of 2

Although we don’t believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes — just in case they’re material to our investing thesis.

Caterpillar Inc. (NYSE:CAT)

After a morning session that saw the Dow Jones Industrial Average (INDEXDJX:^DJI) lose more than 100 points, stocks across the markets have rebounded nicely this afternoon. As of 2:25 p.m. EDT, the Dow Jones Industrial Average (INDEXDJX:^DJI) is up 57 points, with most of the blue-chip index’s stocks in the green. The index hasn’t been held back by a weak jobs report showing a U.S. labor market in flux. Let’s catch up on the stock action you need to know about.

Gloom settles over the labor market
The labor force isn’t seeing much of an uptick — at least, certainly not in August. While August’s unemployment rate declined from 7.4% to 7.3%, the U.S. economy added just 169,000 jobs for the month, falling slightly below economist predictions. Worse, America’s labor participation rate declined to 63.2%, a multidecade low that has come about as more and more out-of-work Americans give up on job-hunting.

However, the labor market pessimism hasn’t hurt stocks too badly despite this morning’s drastic fall. Caterpillar Inc. (NYSE:CAT) ranks among the Dow Jones Industrial Average (INDEXDJX:^DJI)’s leaders today, with shares gaining 1.2%. It’s been a rough road for Caterpillar Inc. (NYSE:CAT) in 2013, with the stock gaining just 1.8% year to date. Morgan Stanley didn’t help yesterday when it cast a cautious outlook for the company’s future, saying Caterpillar Inc. (NYSE:CAT)’s visions of growing construction-equipment demand could go unrealized if the mining sector can’t rebound from its serious slump.

Yet that business hasn’t even been Caterpillar Inc. (NYSE:CAT)’s worst segment in 2013. Construction equipment does account for the second-largest part of the company’s sales, and the segment’s revenue fell 13% year over year in the first half of 2013, with Asia-Pacific sales seeing a particularly steep decline. However, Caterpillar Inc. (NYSE:CAT)’s resource-industries unit isn’t far behind in terms of overall revenue through the year’s first half, and in that time span, resource-industries sales plummeted 29%, including a 44% fall in the Asia-Pacific region. Caterpillar Inc. (NYSE:CAT) will need more than just one of its core businesses to kick-start revenue growth if it wants to turn its fortunes around.

UnitedHealth Group Inc. (NYSE:UNH) is also having a nice day so far, with shares up 0.7%. Unlike Caterpillar, this stock has had a wonderful run in 2013: UnitedHealth’s shares are up more than 37% year to date.

Page 1 of 2