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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.
Stocks are moving slowly lower today as yesterday's sell-off continues. The Thomson Reuters/University of Michigan reading of consumer sentiment fell to 80 this month from 85.1 in July, and the outlook fell to 72.9. Sentiment can bounce a lot from month to month, but in general investors like to see it moving higher, because it indicates that consumer spending, which accounts for 70% of the economy, will improve in the future.
On the plus side, productivity rose 0.9% year over year in the second quarter after falling 1.7% in the previous two quarters. That indicates that companies are getting more out of each worker, which helps drive profit growth in the long term. But that positive indicator wasn't enough to spark buyers today, and the Dow Jones Industrial Average (DJINDICES: ^DJI ) is off 0.12% late in trading, while the S&P 500 (SNPINDEX: ^GSPC ) is down 0.26%.
Verizon (NYSE: VZ ) is the biggest drag on the Dow today, falling 1.8%. T-Mobile (NASDAQ: TMUS ) raised $500 million in its first bond sale since its merger with MetroPCS despite the fact that the company's majority owner, Deutsche Telekom, is trying to sell $11.2 billion in debt it holds. What Verizon investors are seeing is a relatively low interest rate for T-Mobile debt, which means investors are willing to fund the one company gaining steam against Verizon Wireless and AT&T. I don't think Verizon Wireless' long-term position is in any grave danger, but T-Mobile did gain 1.1 million customers last quarter, and Verizon may have to reconsider its contracts or pricing if T-Mobile gains more momentum.
On the positive side, Bank of America (NYSE: BAC ) is up 0.8% today. The company said it plans to fold its Merrill Lynch subsidiary into Bank of America in an effort to cut costs and make reporting more streamlined. Bank of America would then take over Merrill Lynch's obligations and debt, but the company would begin showing a single face to customers. This isn't a surprising move and probably doesn't change the investment thesis, even if the company does see some cost savings.
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