Why J.C. Penney and Groupon Crushed the Market Today

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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.

Last Friday, the major U.S. indexes rallied after the Labor Department released the job number figure. Today, stocks were calmer, but the indexes still managed to finish the session in the green. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) closed the day up five points, or 0.03%, the S&P rose 0.18%, and the Nasdaq increased 0.15%. The lack of economic data left investors time to take in what happened last week, and think about what the Federal Reserve may or may not do with interest rates at its upcoming meeting on December 17-18.

Although the major indexes didn't make waves today, two struggling consumer discretionary stocks outside the Dow performed surprisingly well. Shares of J.C. Penney (NYSE: JCP  ) and Groupon (NASDAQ: GRPN  )  rose 4.33% and 5.83%, respectively. With limited news pertaining to either company today, it's difficult to say exactly why shares performed so well. But, going into today, shares of J.C. Penney had lost 13% of their value during the previous five trading periods, so it wouldn't be difficult to argue that the company was undervalued and that it was a good time to buy if you have been looking for an entry point. The problem, though, is that the stock has been heading lower for a reason. Sales are poor, growth is weak, and it's difficult to say whether or not the company will still exist in a few years' time. All in all, this is not one stock anyone should be betting on as there are easier ways to make money at this time. 

As for Groupon, its competitor, RetailMeNot (NASDAQ: SALE  ) , filed to sell 6.3 million shares of common stock. While that may not sound like a big chunk, the company's float is currently at 15.16 million shares, while the outstanding amount is 50.56 million shares. Adding 6.3 million to the float represents a large increase to what's available on the open market, and thus sent RetailMeNot's shares falling by 4.85% today. Two million of the 6.3 million shares are for holders, and the company is offering to sell them, so that doesn't raise flags that the company needs cash. Considering that it has $136 million on the balance sheet and only $43 million in debt, nothing looks to be out of place. But this move could have scared investors from one coupon website to another; this may be the reason why Groupon's shares rose. 

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Related Tickers

9/29/2016 4:35 PM
^DJI $18143.45 Down -195.79 -1.07%
GRPN $5.10 Down -0.16 -3.04%
Groupon CAPS Rating: *
JCP $9.25 Down -0.30 -3.14%
J.C. Penney CAPS Rating: *
SALE $9.73 Down -0.10 -1.02%
RetailMeNot CAPS Rating: *****