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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.
Even though our politicians waited till the last minute to avoid hitting the debt ceiling, the major U.S. markets all performed rather well this past week. The Dow Jones Industrial Average (DJINDICES: ^DJI ) rose 162, points or 1.07%, ending the week at 15,399, as the S&P 500 increased by 41 points, or 2.42%, and hit a new all-time record high at 1,744. The Nasdaq rose 122 points, or 3.23%, and hit a 13-year high.
After the shutdown noise in Washington ended on Wednesday, investors began focusing on third-quarter earnings reports, which for the most part have been strong and are a big reason only six of the Dow's 30 components ended the week lower.
But before we jump into the week's losers of the week, let's look at the Dow's biggest winner. American Express (NYSE: AXP ) rose 6.79% after the company reported earnings that beat on both the top and bottom lines. Earnings per share came in at $1.25, while analysts were expecting $1.22. Revenue hit $8.3 billion, as estimates were pinned at $8.23 billion. This quarter was a big improvement over the same one last year, too, with EPS of $1.09 and revenue of $7.86 billion back then. The better-than-expected results were the result of cost-cutting this year and an increase in the number of customers who charged items.
Last week's big losers
The worst-performing Dow component of the week was UnitedHealth Group (NYSE: UNH ) , which lost 7.42% over the past five trading sessions. The company posted revenue of $30.62 billion, lower than the $30.86 billion the Street was expecting, and earnings per share of $1.53, which matched expectations. But it wasn't third-quarter results that caused the stock to fall -- it was expectations of how 2014 will treat the insurance company, as well as a lack of clarity about how Obamacare will play out. UnitedHealth said government funding cutbacks for Medicare Advantage and other federally funded programs will put pressure on revenue and profits in the coming year. The company didn't give very specific expectations results, indicating only that 2014 full-year profits may come in above or below 2013 results.
IBM (NYSE: IBM ) lost 6.65% this past week, after the company reported earnings earlier in the week that failed to impress Wall Street. While EPS came in at $3.99, slightly higher than the expected $3.96, revenue of $23.7 billion was far short of the $24.7 billion analysts had called for. Later in the week, a number of analysts began pouncing on the beaten-down company with rating downgrades. Long-term-oriented investors shouldn't run from a few bad quarters just yet. Big blue has been able to battle back and survive tough times in the past so now might not be the best time to run away.
And the third worst Dow performer of the week was Home Depot (NYSE: HD ) , as shares fell 2.14% despite an S&P credit rating upgrade and a stock rating upgrade from SunTrust bank. Poor housing data may not have helped. On Wednesday, the Mortgage Bankers Association said refinancing and mortgage applications rose a mere 0.3% last week compared with the week ending Oct. 4, when applications jumped 1.3%. Furthermore, purchase applications using government aid declined 7% during the week to a level not seen since December 2007. While the slowing activity is probably the result of the government shutdown, we'll probably continue to see weak housing numbers for another few weeks. As for Home Depot, it's no secret that a strong housing market relates to strong sales, so investors may be growing concerned about how the government shutdown will ultimately affect third-quarter results.
The other Dow losers this week:
(For more information on why shares of the other losers fell lower this past week, click on the following links.)
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