No matter how well the general market does, the advance of the Dow Jones Industrial Average still relies on just 30 stocks. Some have outrun their current values, and drops in those shares will undermine an ongoing rise in the index.
Two tech stocks are among those unlikely to do well short term. Their problems are related and have to do primarily with a fall off in personal computer sales. Microsoft Corp.’s (NASDAQ: MSFT) Windows 8 launch has been a modest disappointment. Many blame this on the move many consumers have made from the PC to the smartphone as their primary computing device. The mobile version of Windows is dwarfed in sales by the Google Inc. (NASDAQ: GOOG) Android operating system and Apple Inc.’s (NASDAQ: AAPL) iOS.
Intel Corp.’s (NASDAQ: INTC) problem is closely related. After 20 years producing the heart of PC hardware, it faces the falloff in PC sales. And its chips are not used frequently in smartphones. For example, the iPhone 5 uses a chipset from Intel rival Qualcomm Inc. (NASDAQ: QCOM). Intel continues to attempt to break into the smartphone sector, but its efforts have had little success.
Another vulnerable industry with two Dow components is big oil. Both Chevron Corp. (NYSE: CVX) and Exxon Mobil Corp. (NYSE: XOM) are part of the DJIA. Each faces the same headwinds. Oil supply continues to grow, and the pressure on oil prices has been downward recently, aided in part by the rapid and powerful emergence of shale products. The advance of renewable energy has been slow, but wind and solar continue to gain adoption, particularly in large nations outside the United States, led by China.
Finally, two food companies, one a manufacturer and the other a retailer, have had slow sales recently. This is due in large part to market saturation and competition. Sales of Coke, the flagship product of Coca-Cola Co. (NYSE: KO), have been lackluster. Not only is the product universally available, but healthier drinks have caught on with many consumers, as have energy drinks like Red Bull. McDonald’s Corp. (NYSE: MCD) same-store sales worldwide have been troubled lately. The company continues to be squeezed by the global success of Subway, and to a lesser extent Yum! Brands Inc. (NYSE: YUM). McDonald’s has counted on increasing sales in large nations — mostly China. But competition in that market becomes more crowded by the year.
The DJIA’s rise could be crippled more by trouble at several of its component companies than by anything in the broader markets.