Low Unemployment Claims Could Break Dow's Losing Streak

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 the weekly initial jobless-claims report was released for last week, coming in at 305,000 -- lower than the previously revised reading of 310,000 and much lower than the expected 330,000 new claims economists had forecast. Additionally, the four-week moving average for claims is not down to 308,000, which is a level we have not consistently seen since 2007.

The positive jobs report has helped push the major indexes higher this afternoon: As of 12:45 p.m. EDT the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up 47 points, or 0.31%, while the S&P 500 is 0.35% higher and the NASDAQ has risen 0.63%. Nevertheless, a few losers can be found within the Dow.

Dow losers
Yesterday Intel (NASDAQ: INTC  ) announced that it would keep its quarterly dividend at $0.222 per share -- the same amount as the past five quarterly distributions. The previous amount of $0.21 per share was increased after four quarters, while the amount prior to that was raised after just two. While it's unlikely that investors are selling today strictly because of the dividend amount, the stagnant payment may now begin to raise questions among investors about the health of the company. When board members believe the company is strong and will continue to produce a sustainable amount of free cash flow that can be paid back to shareholders, they raise the dividend. But when they're unsure about how much money will be coming in, they either decrease the dividend amount or simply maintain it, as Intel has decided to do. Shares of Intel are lower by 1.6% today. 

Shares of Cisco (NASDAQ: CSCO  ) are also moving lower today because of news from yesterday. Last night on CNBC's Closing Bell, Cisco CEO John Chambers presented a challenging road ahead for the company. Chambers said that while the U.S. is a growth engine, European demand is recovering and emerging markets are "mixed." The company provided weaker-than-expected guidance for the fourth quarter last month after reporting earnings, so news that a number of markets the company operates in are performing poorly shouldn't be a surprise. But when your CEO comes out on national television a month after first telling investors things will be tough, it doesn't suggest that this will not be a short-lived downturn. Cisco's stock is down 1.3% today.  

Lastly, shares of Caterpillar (NYSE: CAT  ) are down 0.6% this afternoon. My colleague Reuben Brewer recently noted that the company has recognized that in the short term, business may struggle due to regulations on the coal industry and the current economic downturn happening throughout the world. But management believes the company has a long runway ahead of it based on world population increases and the need for basic structures, roads, and so on, which will all require Caterpillar's equipment to build. Furthermore, the increase in population will increase the demand for energy and most likely coal will be a part of that equation. It may be hard to deny that Caterpillar will be around for the long run and that as population growth occurs, construction will be necessary. But all of this unfortunately will not happen for a number of years, and that doesn't help an investor who wants returns today and feels that if Caterpillar can't provide them, someone else will.

A Deeper Foolish Perspective
With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!


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  • Report this Comment On April 10, 2014, at 7:19 PM, FredABates69 wrote:

    I am starting to see that stock holders are selling on the news of lower unemployment fillings. The job craters would rather companies have cash on hand, which they have in record amounts, rather than invest in hiring or giving raises to their workers. Also, if unemployment is in danger of going down, they know that the fed will ease the quantifying easing. Goverment spending bad, they say, but even hint at one day taking away the punch bowl of quantitative easing, sell sell sell.

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