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.
Hold onto your seat because this doesn't happen nearly enough anymore, but today's U.S economic data and the strong move higher actually make sense. By that, I mean that lately we often see the market move higher despite negative economic data and lower on days when the data seems extraordinarily strong.
Helping move the broad-based S&P 500 (SNPINDEX: ^GSPC ) higher today was positive housing data as well as another month of solid U.S. auto sales figures. On the housing front, the Mortgage Brokers Association reported that mortgage originations rose 1.3% last week -- a very rare increase since 30-year mortgage rates hit their lows in early May. Higher originations would portend good news for homebuilders looking to move new housing inventory.
Better-than-expected U.S. auto sales from General Motors and Ford also served as a sticking point for today's rally. In fact, all major automakers reported a double-digit increase in sales in the U.S. for August, with GM reporting a 15% increase in unit sales and Ford delivering a 12% increase. Perhaps the biggest surprise of all was Honda Motor and its 27% increase in unit sales over the previous year, but it's all good news for the auto industry, which relies on consumer spending to drive its growth.
By the day's end the S&P 500 had advanced 13.31 points (0.81%) to finish at 1,653.08, its second-straight day of gains.
Leading the charge higher today was brokerage firm E*TRADE Financial (NASDAQ: ETFC ) , which gained 8.1% after announcing that its banking subsidiary will pay an ongoing $100 million dividend on a quarterly basis to its parent company. The move should allow E*TRADE to finally begin paying down its debt and deleveraging its assets even further away from its mortgage portfolio, which still contains toxic assets. It's a firm move in the right direction for E*TRADE, but still doesn't represent a buying opportunity in my opinion until the credit quality of its loan portfolio improves further.
Shares of network equipment maker Juniper Networks (NYSE: JNPR ) jumped 6.5%, riding the coattails of Ciena (NYSE: CIEN ) higher after it reported a better-than-expected third-quarter profit and fourth-quarter revenue forecast. The entire networking sector is set to benefit from increased spending in the communication services sector as the 4G LTE craze sweeps the United States. It often takes a few quarters for service providers' spending to trickle down to network equipment providers like Juniper and Ciena, but we're beginning to see the first signs of that happening. I expect this sector to be a big outperformer over the coming year or two.
Finally, struggling retailer J.C. Penney (NYSE: JCP ) added 6.1% today after an SEC filing last night disclosed that Larry Robbins' hedge fund, Glenview Capital Management had taken a 9.1% position in J.C. Penney's stock. This news comes as Bill Ackman and his hedge fund Pershing Square Capital Management are hitting the exit door with their previously monstrous stake in Penney's. I'm sure everyone here would like to be the hero who got into J.C. Penney at the bottom, but I remain concerned that Penney's did too much harm to its core customer by removing its discounts under former CEO Ron Johnson to reverse its losses. Although Penney's second quarter showed some signs of improvement, I'm not sure it has the tools or talent to become profitable on an annual basis again -- and that's enough reason to keep away!
If anything, J.C. Penney's serves as notice that the retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of the last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.