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.
As all indicators leading up to it predicted, the November jobs report soared past expectations. The country added 203,000 jobs last month, up from 200,000 in October, and beat economist estimates at 188,000. Meanwhile, the unemployment rate dropped three-tenths of a percent to 7%, taking a major step to the Federal Reserve's goal of lowering the jobless rate to 6.5%. As a result, the Dow Jones Industrial Average (^DJI -1.67%) jumped 199 points, or 1.3%, while the S&P 500 gained 1.1%. Not only was it a strong sign to see a second straight month of 200,000 new jobs added to payrolls, but it was also reassuring to see the market react positively to the news, instead of selling off in fears that the robust employment growth would spark the Fed's stimulus taper. The market's reaction seemed to indicate that it's starting to believe the economy is strong enough to stand on its own, without the Fed's assistance.
The number of long-term unemployed Americans held steady at 4.1 million, though that figure has dropped more than 700,000 in the last year. However, the number of involuntary part-time workers dropped 4% to 7.7 million, a strong sign for those struggling to get out of structural unemployment.
Among stocks riding the rising tide today was Diamond Foods (DMND.DL), which jumped 6.8% after it beat earnings estimates last night. The maker of Pop Secret Popcorn and Kettle Chips posted an adjusted EPS of $0.18, better than expectations of $0.14, even as revenue fell 9.2% to $234.7 million, below the consensus. The company is in the midst of a multiyear repositioning strategy, and CEO Brian Driscoll noted the "headwinds from lower walnut supply and Emerald relaunch costs." For the year, management said it expects adjusted EBITDA to improve even as it fell in the fiscal first quarter. While Diamond still has legal woes to contend with, shares have nearly doubled this year, and its strong brand portfolio gives reason to believe that they will reemerge from the turnaround as a stronger company.
Moving in the opposite direction today was American Eagle Outfitters (AEO 0.85%), which finished down 9% after it joined the vast ranks of apparel retailers posting dismal holiday-quarter guidance. The teen retailer said it sees profits for the current quarter at just $0.26-$0.30, below analyst estimates at $0.39. Last year, the company made $0.55 per share in the fourth quarter. Oddly enough, American Eagle is actually doing better than its rivals Aeropostale and Abercrombie & Fitch as consumers seem to be turning away from their brand-heavy apparel and instead shopping at fast fashion retailers such as H&M. With a trend like that confronting them, it seems like those three mall-based retailers have several ugly quarters ahead of them.
