Dow Drops 5th Straight Day, J.C. Penney, Rite Aid Plummet

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.

The first week of December hasn't been kind to the stock market this year, as Wall Street anxiously awaits Friday's nonfarm payrolls report. If the labor market shows too much improvement, the Federal Reserve may start tapering its stimulus efforts, and corporate America is pretty content with the Fed's unprecedented loose-money policies right now. Gross Domestic Product, or GDP, rose at a 3.6% annual rate in the third quarter, exceeding expectations. Jobless claims also fell last week, increasing fears that the U.S. economy may, in fact, be improving nicely. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) lost 68 points, or 0.4%, to end at 15,821 ahead of tomorrow's jobs report. 

Mega-retailer Wal-Mart (NYSE: WMT  ) , which knows a thing or two about jobs as the largest private employer in the country, saw shares fall 1% today. The company finds itself under intense scrutiny from investors this holiday season: Yesterday, the stock ended as the Dow's worst performer. President Obama's mission to increase the minimum wage poses a large concern for shareholders, as the proposed increase from $7.25 per hour to $10 an hour would increase Wal-Mart's costs, and threaten its bottom-line growth. 

Drug store Rite Aid (NYSE: RAD  ) released same-store sales figures for November on Thursday, which disappointed investors, and sent the stock down 6.3%. Same-store sales growth, a vital metric for retail investors to watch, ignores data from newer stores, measuring instead the change in revenue for locations that have been open for at least one year. Rite Aid's same-store sales grew by 2.8% last month from November of last year, with the pharmacy's revenue driving most of the growth. Rite Aid is certainly growing, but for shareholders who've seen the stock more than quadruple in 2013, the question is simple: Is growth slowing

Rite Aid's growth -- as with any public company -- must be compared with Wall Street expectations for the progress to be fully understood. Another prime example of this dynamic is the case of J.C. Penney (NYSE: JCP  ) , which saw its stock take a nasty 8.4% haircut today. The department store saw same-store sales jump by 10% in November, which, on the face of things, sounds quite impressive. But a research note from Wells Fargo on Thursday emphasized the poor quality of this sales bump, implying that the success was due to unique promotional strategies, and forecasting less-impressive sales between now and Christmas. On top of that, the hedge fund Hayman Capital Management, which owned more than 5% of J.C. Penney stock, revealed to the public that it had liquidated its entire position in the struggling retailer due to a weaker-than-expected turnaround.

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  • Report this Comment On December 05, 2013, at 10:48 PM, bluesky64 wrote:

    John,

    My rad sold off big time is retail in trouble?

    The only thing selling out is Xbox and Play Staion

    should I invest in AMD ? the provider of the chip that makes the game consoles so great.

  • Report this Comment On December 06, 2013, at 8:18 AM, mikelgh100 wrote:

    AMD may still be a good play I am averaged in now at $3.59. I am hoping it goes to $10.

    Their margin on console games is not large enough to sustain the company on that alone. Some people think otherwise. maybe HP's growth in sales will help since AMD chips are used in their laptops?

    I think RAD will struggle from time to time but I see this going up higher and Long on RAD

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