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Markets Slide as Bearish Sentiment Runs Rampant

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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.

As investors continue to fear the day the Federal Reserve begins paring back its bond-buying program, the major stock indexes are all in decline today. As of 12:45 p.m. EDT the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down 86 points, or 0.56%, while the S&P 500 is lower by 0.32% and the Nasdaq has lost a more modest 0.11%.

A few Dow losers
Ahead of tonight's earnings release, shares of Cisco (NASDAQ: CSCO  ) are down 0.6%. The company is expected to report earnings of $0.51 per share on revenue of $12.41 billion. For the same quarter last year the company reported EPS of $0.47 on sales of $11.69 billion. Furthermore, the company has beaten EPS estimates in each of the last four quarters, and the average analyst estimate for this quarter hasn't changed from $0.51 during the last 90 days, which begs the question: Why are shares falling? 

As my colleague Dan Caplinger noted earlier today, the company is facing increasing pressure from competitors. But I would add that we haven't seen a terribly great quarter from other companies in Cisco's areas of business, and that may be leading investors to believe today's earnings report will mark the company's first miss in the last five quarters.

Boeing (NYSE: BA  ) is once again having technical problems with its 787 Dreamliner today. ANA Holding, the 787's biggest operator, said it found wiring defects in three of its Dreamliners. The main problem is that the fire-suppression system in the 787 wasn't wired correctly, so if the plane had a fire in one of its engines, the wrong extinguisher would be activated. Anyone who owns shares of Boeing or follows the company even casually knows this isn't the first, or even the second, issue the company has had with its revolutionary 787 Dreamliner. But despite all the problems the plane has had in 2013 -- and after today's 1.3% decline -- shares are still up more than 39% year to date.  

After yesterday's 2%-plus gain, shares of Hewlett-Packard (NYSE: HPQ  ) are down 1% today. Yesterday's jump was sparked by two analyst upgrades, which cited reasons such as an anticipated earnings beat next week, signs of progress in CEO Meg Whitman's turnaround plan, effective cost-cutting, and expected gains in HP's IT unit. While these reasons all seem valid, yesterday's spike seemed a little overdone. First, Jim Suva from Citigroup said he believes this quarter's result will beat the consensus estimates. Yet the consensus is derived from 27 analysts' predictions, so Suva's not the only one who feels the results will be higher; there are likely at least another 10 to 13 firms that agree on that point. While the cost-cutting measures being undertaken by HP are great and the turnaround story still looks strong, the expected gains in the IT unit again go back to expected overall results, which shouldn't really mean much when only one analyst is expecting better returns than the others.

The point to all this is that investors shouldn't buy or sell based on one or two analysts' predictions. They should make smart, fact-based decisions that take into account actual results -- not predictions of what those results will be. With that said, today's stock price decline is likely justified, in my humble opinion.

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Today's Market

updated 32 minutes ago Sponsored by:
DOW 18,143.45 -195.79 -1.07%
S&P 500 2,151.13 -20.24 -0.93%
NASD 5,269.15 -49.39 -0.93%

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Related Tickers

9/29/2016 4:35 PM
^DJI $18143.45 Down -195.79 -1.07%
BA $131.03 Down -1.20 -0.91%
Boeing CAPS Rating: ****
CSCO $31.39 Down -0.11 -0.35%
Cisco Systems CAPS Rating: ****
HPQ $15.39 Down -0.10 -0.65%
HP CAPS Rating: ***