3 Losers Pulling the Markets in Different Directions

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.

This morning investors received more good news regarding the housing market. The U.S. Census Bureau reported that new home sales in August rose 14.6% over July's revised numbers. The annual adjusted rate for August came in at 421,000, which is higher than 390,000 sold in July and above the 415,000 expected by economists. Additionally, the Mortgage Bankers Association released data indicating that mortgage applications rose 5.5% last week. The uptick in mortgage applications came as interest rates fell after the Federal Reserve decided not to taper during its September meeting.

The two positive reports aren't enough to break the Dow Jones Industrial Average's (DJINDICES: ^DJI  ) current losing streak, as the index is still down by five points, or 0.03%, as of 1:10 p.m. EDT. That said, the S&P 500 and the NASDAQ are higher by 0.13% and 0.26%, respectively.

A few losers
Shares of retail king Wal-Mart (NYSE: WMT  ) are moving lower by 0.95% today. Wal-Mart recently announced that it would hire roughly 55,000 new part-time employees for the holiday season and transfer 35,000 workers from part-time status to full-time. The move comes as the company has been flooded with complaints about inaccurate or empty shelves. Wal-Mart executives understand the threat posed by the online world, particularly Amazon.com, and its vast array of products. But Wal-Mart can fight back with great customer experiences in which shoppers can always find what they need when they need it in the physical store. The increase of full- and part-time employees is one way the company plans to fight off the online competition and provide a better customer experience, but it is a big bet that may not pay off. The increased employee count boosts costs but doesn't guarantee an improved shopping experience or availability of all products sought by consumers.  

Another big retailer struggling today is J.C. Penney  (NYSE: JCP  ) which is down 13.13%. The move comes after a Goldman Sachs analyst gave the company a poor rating. The downgrade comes from Goldman's credit team and pertains to J.C. Penney's unsecured debt, which has been given an underperform rating. The analyst believes the company will have to tap the debt markets prior to the holiday season to protect itself against what many believe will broadly be a poor shopping period for J.C. Penney and other retailers. With that poor of a rating on the debt, J.C. Penney will likely have a rather high interest rate, which could put the company into a deeper hole as it tries to repay the loan.  

Another downgrade causing problems today came from Morgan Stanley and hit cruise line Carnival (NYSE: CCL  ) . The firm lowered Carnival from equal weight to underweight after the company recently reported a disappointing guidance. Morgan Stanley also lowered its price target on the hospitality company to $32. Carnival's guidance, announced yesterday along with its earnings, has a range of a loss of $0.03 per share to a gain of $0.03 per share. This comes for the fourth quarter of the year, in which analysts had previously projected a gain of $0.08. Additionally, management stated that  a number of challenges and high costs will continue well into 2014. After falling 7.64% yesterday, shares are down another 4.81% today.

More Foolish Insight
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of 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.


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