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

What: Disappointing earnings had investors shipping Blue Nile (Nasdaq: NILE) down the river this morning, as the stock dropped 10.5% on bad news. It's pared the losses somewhat since, however.

So what: What caused the sell-off? Well, there was an earnings miss to begin with -- Nile earned $0.19 per share in the second quarter, versus Street expectations of $0.21. The real damage, though, I suspect, came when Nile warned investors that it was going to fall at least a nickel short of third quarter estimates, which currently have Nile pegged for $0.22 per share.

Now what: Between the second-quarter miss that just happened, and the third-quarter miss that probably will, you have to expect analyst full-year profit estimates to walk back to about $1 a share, or less. If that's how things work out, Nile today costs about 35 times current year earnings -- a pretty price to pay for a stock the Street thought would fall short of 18% long-term growth even before the earnings warning.

I think investors got it right the first time, when they sold off Blue Nile shares in droves. My hunch: We end the day with Nile losing something closer to the original 10.5% than to the 4.5% it's currently losing.

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