This morning, the release of the final revision to the first-quarter GDP number was seen as a positive thing for equities, despite the GDP number representing slower than previously estimated economic growth in the U.S. during the first three months of 2013. A previous GDP report indicated that the economy grew at a rate of 2.4% in the first quarter, but that was revised downward to growth of a mere 1.8%. A slow economy would typically mean doom and gloom for Wall Street, as businesses would be expected to report weak quarterly results. But as the closing bell rang today, the Dow Jones Industrial Average (Dow Jones Indices:.DJI) was up 149 points, or 1.02%, and now sits at 14,910.
So the reason for the rise today is that this poor economic data will likely push the Federal Reserve’s tapering of bond-buying back. The Fed had stated that if the economy continues to move forward and grow at a reasonable rate, it would start slowing its bond-buying program toward the end of 2013. Now that we all know the economy isn’t as strong as what it appeared to be, the Fed may need to adjust its date for tapering, which is what equity investors want to see happen.
The Dow Jones Industrial Average (Dow Jones Indices:.DJI)’s triple-digit move higher allowed all but three of its components to move higher today. The three losers were International Business Machines Corp. (NYSE:IBM), Alcoa Inc (NYSE:AA), and Caterpillar Inc. (NYSE:CAT). This afternoon I discussed why Alcoa and Caterpillar were moving lower, now let’s take a look at International Business Machines Corp. (NYSE:IBM).
International Business Machines Corp. (NYSE:IBM) lost 0.06% today as the other Dow Jones Industrial Average (Dow Jones Indices:.DJI) technology stocks all moved higher by more than half of a percent. The company has long been a stalwart in the technology industry with its massive server business and IT support units. But the top dog may be losing some of its dominance as we see other technology-focused companies move onto its turf. Hewlett-Packard Company (NYSE:HPQ), Microsoft Corporation (NASDAQ:MSFT), and Cisco Systems, Inc. (NASDAQ:CSCO), to mention a few, have all made big moves into the server and cloud computing business and ramped up their own IT support staffs. We have long thought of International Business Machines Corp. (NYSE:IBM) as a slow-moving giant, which it rightfully has gained that image, but if it can’t soon quickly begin moving to fight off the invaders, it may soon stumble and fall.
Outside the Dow Jones Industrial Average (Dow Jones Indices:.DJI), we once again saw some big moves lower from the coal stocks. Shares of Peabody Energy Corporation (NYSE:BTU) fell another 3.26%, while CONSOL Energy Inc. (NYSE:CNX) slid another 2.97%. Both companies are big players in mining coal and with the slowing Chinese economy, which is a huge customer for the industry and Obama’s recent comments on climate control, the stocks have been bounded. While many experts had been expecting the president to make a stand against coal-fired power plants, a speech he gave on Tuesday was the first time we heard a plan to slow the carbon output caused by burning coal in electric power plants. Obama is aiming to put further restrictions on coal-fired power plants by forcing them to reduce their carbon emissions, a move that most would argue will cost more than it is worth and essentially force utility companies to shut down the plant or convert it to operate on another form of fuel. If his plan goes into effect, the move will surely hurt the coal industry as demand for the resource will take a nosedive.