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.
After three days of heady growth, stocks finally pulled back today. With no new developments from Syria, and no major economic reports driving the market, investors seemed unsure of where to go as they awaited the key Fed meeting next week. In the end, the Dow Jones Industrial Average (INDEX: ^DJI) finished down 26 points, or 0.2%.
Investors did receive one piece of seemingly good news, as initial unemployment claims dropped to 292,000 last week, though the sudden downturn, well below estimates at 330,000, was due to computer-conversion glitches in two states. Still, nearly two-thirds of states reported a decline in claims, indicating that the numbers would have likely improved from last week's 323,000 without the missing data.
Disney (NYSE: DIS) stock shot up this afternoon after management announced a plan to buy back $6 billion-$8 billion in shares next year, up from $4 billion this year. CFO Jay Rasulo said at an investor conference that management has confidence in the company overall, and in its upcoming box office release. With Disney's market cap near $120 billion, the buyback should lift EPS by 5%-7%. Shares rose 2.4% on the news.
JPMorgan Chase (NYSE: JPM) was on the other end of the dial today, sliding 1.9% after peer Citigroup cut 2,200 jobs in its mortgage origination business in response to rising mortgage rates. JPMorgan, which already made similar cuts to its own mortgage banking division, has similar problems with rising interest rates. Earlier this week, CFO Marianne Lake said the bank could lose as much as $15 billion on its $333 billion bond portfolio if interest rates rise as much as two percentage points. That contrasts with CEO Jamie Dimon's statement back in April that the bank would make an additional $5 billion on lending if rates were to rise three percentage points, so it's hard to determine which would have a greater effect on its bottom line.
Finally, Verizon (NYSE: VZ) jumped 1.8% as buyers rushed to snap up a piece of its $49-billion bond offering. The bonds immediately jumped in value on the secondary market, an indication both of investor confidence in Verizon's ability to repay its debt, and also a belief that the interest rates may be generous. With the debt offering complete, Verizon will take over Vodafone's 45% stake in the Verizon Wireless joint venture, a move that will consolidate the No. 1 U.S. telecom's hold on the American market. AT&T (NYSE: T) shares moved up 1.2% in a tandem play, as the market's eagerness for Verizon's debt indicates Ma Bell should have no problem tapping the bond markets if it chooses to make an acquisition of its own.
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