Why Today's Dow Gains Weren't Just About Disney

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.

The year 2014 has been disappointing for stock market investors so far, so today's jump of 188 points for the Dow Jones Industrials was a welcome respite from the declines that we've seen during the first five weeks of the year. Disney dominated the headlines with its strong earnings report, which lifted the entertainment giant's shares by more than 5% today. But of even greater importance was the breadth of today's rally, with all but three components in the Dow gaining ground, and with key stocks Visa , Caterpillar , and American Express all pointing toward hopes for greater strength in the U.S. economy.

Disney's numbers were unquestionably good, but they weren't entirely unanticipated. Disney has set the stage for strong growth for years, with its strategic acquisitions of content-rich production businesses helping Disney's studio entertainment division post monumental gains of 23% in revenue and 75% in operating income. If anything, the stock's huge gains today only reflect the immense pessimism that had overtaken the market broadly in recent weeks.

But potentially far more important for the Dow's future prospects were continuing gains in other stocks. Caterpillar's 2% rise seems inconsistent with the fears that many have about prospects for the construction and mining industries both in the U.S. and in key emerging markets like China. But given the hit the stock has taken in recent years, Caterpillar now has shareholders increasingly convinced that the worst times could be over, and that even a delayed pickup in construction and mining activity will eventually pan out in greater profits.

At the same time, Visa and American Express both posted solid gains of 1.5% to 2.5% today, and their measurement of the willingness of consumers to spend remains a key component of overall economic growth. In particular, AmEx has its finger on the pulse of the high-end consumer, while Visa has a broader base to provide a different view of the same general trend. As long as both of those companies remain strong from a business perspective, it'll be hard to think of any drop in the market as being anything but a short-term aberration.

Headlines often trumpet the story of the day, but it's important to keep a broader perspective. Only by looking at all the crosscurrents in the market can you put together a complete picture of the health of the market.