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.
Major indexes are mixed following the release of preliminary University of Michigan Consumer Sentiment Index figures today that suggest U.S. consumers were not feeling great about the economy this month. The index fell short of the expected 83.5 reading, instead hitting only 80.4. As of 1 p.m. EST, the Dow Jones Industrial Average (INDEX: ^DJI) is up 60 points, or 0.37%, but the S&P 500 and the Nasdaq are down 0.08% and 0.18% respectively.
One reason the Dow is moving higher today is because of American Express (NYSE: AXP), which has risen nearly 5% at this time. The credit card company reported fourth-quarter earnings that were rather good on all standards, despite missing analysts' earnings predictions. The company increased income from $637 million in the year-ago quarter to $1.3 billion this year. Additionally, return on equity rose from 23.1% in the last quarter of 2012 to 27.8% at the end of 2013.
The strong results from American Express have boosted fellow Dow component and credit card company, Visa (NYSE: V). Visa shareholders can now have confidence that its next earnings report will also be strong. Visa is up more than 2% at this time. And with Visa being the Dow's largest component, a 2% move higher makes a big difference and can wipe out lighter-weighted companies' moves.
For example, shares of Intel (NASDAQ: INTC) are off by 3.1% today. But since Intel's stock price is only $25.67, making it the second lightest stock within the Dow at only 1.04% of the index's weight, that drop means little compared to Visa's 8.66% of the Dow.
Intel reported quarterly earnings yesterday that weren't bad, as sales hit $13.83 billion and gross margin came in at 62%. The company had previously forecast these figures at $13.7 billion and 61%. Intel, though, beat Wall Street estimates on revenue but fell short on earnings. The biggest problem was that expectations for the company had risen dramatically over the past few months; investors were expecting a lot from the chip manufacturer and they didn't get what they wanted. Today's move is rather irrational, in my opinion, and investors should hold tight as things don't look that bad for Intel.
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