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Pandora Continues Amazing Run, Lumber Liquidators Slumps on Forecast

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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.

Capitol Hill's notorious dysfunction is the source of many a headache and punchline. But after a miraculous turn of events -- in which the House and Senate have actually brokered a deal with one another -- it looks like Americans will briefly be robbed of political tragicomedy. Congress is expected to reach an official budget deal tonight, avoiding a second government shutdown in two months. Bravo! News of the expected deal didn't break until after markets closed, so perhaps Wall Street will find solace in the news tomorrow. Today, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) fell 52 points, or 0.3%, to end at 15,973.

Home Depot (NYSE: HD  ) stock was one of the larger culprits sending the blue-chip index lower Tuesday, as shares of the home-improvement retailer dropped 1.2%. Given the current sentiment on Wall Street, it's understandable that housing-related plays may suffer in trading before the next Federal Open Market Committee meeting next week. The dreaded "taper," in which the central bank begins trimming its monthly economic stimulus, may be announced then, which would leave room for interest rates to increase. Even given this situation, my colleague Michael Lewis believes there could still be a number of reasons to invest in stocks like Home Depot.

That said, Lumber Liquidators (NYSE: LL  ) stock is a play on the housing market, and its shares cratered 13.7% today. Of course, the precipitous drop was due to company-specific developments and not an overall weakness in the housing market. Lumber Liquidators has been scrutinized recently, as some suspect the company illegally sourced timber from Russia in order to achieve its great margins. Margins and profit guidance were in the spotlight Tuesday as shareholders reacted to the company's unimpressive guidance for the fourth quarter and 2014 fiscal year. 

On a different note, Pandora (NYSE: P  ) stock added 3.7% on Tuesday, as social media and hot young Internet companies caught fire on Wall Street. Pandora shares have more than tripled in value this year alone, despite the fact that the music streaming service is not yet profitable. That hasn't seemed to inhibit Twitter shares, either, as stock in the social media behemoth has essentially doubled since the company went public just over a month ago. I'm not sold on the idea of betting big on companies like Pandora, which operate in industries with low barriers to entry and very difficult economics. I enjoy the (free) service as a consumer, but I'm not a fan of the stock as an investor. 

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Related Tickers

9/28/2016 5:27 PM
^DJI $18339.24 Up +110.94 +0.61%
HD $128.27 Up +1.45 +1.14%
Home Depot CAPS Rating: ****
LL $18.21 Up +0.20 +1.11%
Lumber Liquidators CAPS Rating: ***
P $14.41 Up +0.27 +1.91%
Pandora Media CAPS Rating: **