Dow Tumbles With Costco but Visa and MasterCard Soar

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.

Stocks pulled back today as investors reacted to yesterday's apparent congressional budget deal as the Dow Jones Industrial Average (DJINDICES: ^DJI  ) fell 130 points, or 0.8%, while the S&P 500 dropped 1.1%.

Visa (NYSE: V  ) led the Dow winners, gaining 3.1%, as it jumped on good news from rival MasterCard (NYSE: MA  ) , whose shares jumped 3.5% after announcing a 10-for-1 stock split and a $3.5 billion repurchase plan. With a market cap of $95 billion, the $3.5 billion repurchase program should lift earnings per share over the long run by about 3.5% so today's jump may be a little exaggerated. Stock splits, while often generating attention and enthusiasm, should have no effect on a stock movement. The credit card company also said it would hike its quarterly dividend to raise its yield from 0.3% to 0.55%. Both companies have relatively low dividend yield, but rake in gobs of free cash flow. Many market observers expect the capital being returned to shareholders to increase.

Warehouse retailer Costco (NASDAQ: COST  ) finished down 1.2% after it missed on top and bottom lines. While retailers across the board have struggled this quarter, Costco as a low-price competitor with a membership model seemed immune from the industry's woes but that was not the case. Earnings per share came in at $0.96 against estimates of $1.02 as expenses grew faster than revenue. Expenses for employee stock option grew 24% due to a large gain in the company's stock price this year, and sales moved up 5% to $24.47 billion, short of estimates of $25.35 billion. Same-store sales were up 3%, or 5% excluding changes in fuel prices and currency translation, indicating the core business remains strong.

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