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Don't Read Too Much Into the Downers of the Dow

Tickers in this article: CIEN IBM JNJ TRV VZ

Today's market ended with the Dow Jones Industrial Average down 44 points while the S&P was in fact up 0.28%. Why the divergence? Key Dow components reported quarters that were seen as disappointing, but ultimately, as I highlight below, these names are still well positioned and we still see an underlying healthy market. 

The downers of the Dow?

Verizon : While the company reported a solid quarter (ie solid wireless results and improving wireline margins), Verizon didn't give fulsome 2014 guidance--largely due to pending Vodafone deal. Yes, there is more spending coming for the company: Verizon guided for full-year 2014 capex of $16.5 billion to $17.0 billion, about 2% higher than consensus expectations (beneficiaries include names like Ciena and Juniper along with the tower companies like SBA Communications and American Tower ). And yes, the company will be issuing 1.2 billion new shares related to the Vodafone deal, expected to close in a month. But that will be temporary pressure and the company still has a solid dividend with growth.

Travelers : The insurance giant reported a fourth quarter beat, but the stock sold off as investors worried about pricing slowing, a question-mark that has been plaguing the full property & casualty (P&C) group. A still well-positioned name in the group is American International Group , which remains a turnaround name driven by P&C driven operating recovery.

Johnson & Johnson : The quarter was solid and 2014 guidance was conservative and achievable. This is a great name in the pharma group because it is defensive but also has embraced more growth of late with pharma product launches (recent launches include Zytiga and Xarelto) with more to come (Imbruvica, Invokana), consumer products issues in the rearview, and improving utilization trends in medical devices. That 3% dividend yield is pretty compelling as well.

The bottom line: All three of the supposed disappointments in the Dow today remain well positioned. And we still saw underlying market strength in the broader averages. Still early in earnings season, we need to see more from companies before we jump to any conclusions.

Of course, one Dow component that reported after the bell remains a troubled spot: International Business Machines Corp . The financial engineering to get to the $20 EPS target in 2015 still shows no signs of real growth.. and this operational miss is keeping investors at bay.