Dow Jones Today Recovers to 16,000

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.

The Dow Jones Industrial Average  (DJINDICES: ^DJI  )   jumped up 53 points, to 16,017, as of 1:30 p.m. EST, after some mixed economic releases and earnings from Cisco (NASDAQ: CSCO  ) that missed expectations. The S&P 500 (SNPINDEX: ^GSPC  ) was up eight points to 1,827.

Cisco reported second-quarter earnings yesterday after the market close that have sent the stock down 4% to $22. The networking specialist reported net income of $1.43 billion for earnings of $0.27 per share, down slightly  more than 50% from last year's $0.59 per share, or $3.14 billion. Earnings were hurt by a $655 million charge related to a memory chip problem, which cut per-share earnings by $0.12. Adjusted earnings, which don't include one-time charges, was $0.47 per share, just above analyst expectations of $0.46 per share.

Revenue was down 8% to $11.2 billion from $12.1 billion in the year-ago quarter, but was still above analyst expectations of $11 billion. Cisco expects revenue to continue falling another 6%-8% in the current third quarter.

It wasn't all mediocre news, Cisco announced it had repurchased 185 million shares in the most recent quarter at an average price of $21.73 per share, for a total purchase of $4 billion. The company also said it would increase its quarterly dividend from $0.17 per quarter to $0.19, a 12% boost. At the current price the forward yield is now 3.45%.

There were three U.S. economic releases today.

Report

Period

Result

Previous

Weekly new unemployment claims

2/1-2/8

339,000

331,000

Retail sales

January

-0.4%

-0.1% (r)

Retail sales ex-autos

January

0%

0.3%

Business inventories

December

0.5%

0.4%

The one to pay attention is retail sales that unexpectedly dropped a seasonally adjusted 0.4% in January; economists had expected retail sales to fall just 0.1%. Also important to note, December retail sales had previously shown a 0.2% growth in the Department of Commerce's first estimate, but the number was revised downward to a 0.1% drop for the month. Pulling retail sales down were automobile sales. Excluding automobile sales, U.S. retail sales were flat in January, but still slower than December's 0.3% growth. The news of weaker December and January retail sales, coupled with the past few months' weak job reports, likely means the economy has not grown as fast as previously expected for the fourth quarter of 2013 or the first quarter of 2014, where the initial estimate and current expectations are 3.2%. and 2.3%, respectively.

Foolish takeaway
So what can an investor do in times like this? The stock market is overvalued, and earnings look cyclically high. That said, predicting where the broad market will go in the short term is a game for fools (with a lowercase "F"). Stocks can always get more overvalued. When things get frothy, it's worthwhile to build up some cash on the side for when prices inevitably fall.

The Motley Fool has always taught that Foolish (capital "F") investors don't invest in the broad market. We invest in great companies at good prices, continue to educate ourselves, and hold on to our great companies over the long term. The market will fluctuate (sometimes massively), but great companies will win out over the long run.

As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2838576, ~/Articles/ArticleHandler.aspx, 10/31/2014 4:44:09 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement