Why J.C. Penney, E-House China Holdings, and Armstrong World Industries Tumbled Today

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 continued their impressive run Monday, building on their gains from last week, and sending the Nasdaq Composite to its best close in 14 years. Yet, even on a day in which general bullishness was a major support for most stocks, J.C. Penney (NYSE: JCP  ) , E-House China Holdings (NYSE: EJ  ) , and Armstrong World Industries (NYSE: AWI  ) missed out and posted substantial declines on the day.

J.C. Penney fell 7% ahead of its earnings report on Wednesday, with a negative report from department-store peer Dillard's (NYSE: DDS  ) weighing on the entire sector today. Dillard's said that it missed earnings expectations by a full 10%, again citing the oft-mentioned highly competitive promotional discounting environment as hurting bottom-line figures. Given that Dillard's has generally been healthier than J.C. Penney, the fact that Dillard's has had problems bodes even worse for J.C. Penney's efforts to execute a successful turnaround in 2014.

Online Chinese real-estate service provider E-House dropped almost 10% after reports from Chinese media sources that banks are starting to implement tighter credit policies on property developers in the emerging-market nation. That was bad news for E-House and rival SouFun (NYSE: SFUN  ) , which fell 6%, as demand for their services depend on a healthy market for real estate. Many analysts have called for a correction in the red-hot property market in China for years, and if reports of tighter credit prove true, it could be the catalyst to bring a much-need correction for the market.

Armstrong World Industries dropped 9% after reporting fourth-quarter earnings that disappointed investors this morning. Armstrong's revenue rose almost 8% from year-ago levels, with strength in its wood-flooring product line, and better sales volumes in its building-product division. But operating income dropped 28% for the quarter, as raw-materials costs for lumber and higher general expenses weighed on the company's profitability. With guidance for the full 2014 fiscal year that was generally well below what investors were looking for on the earnings front, Armstrong's results support the conclusion that growth prospects for its business might not be as strong as recent economic conditions would suggest.

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