Low Inflation Means More of the Same From Fed

Microsoft jumps on rumors ,while Wal-Mart is flat after announcing it is entering a new business.

Mar 18, 2014 at 1:00PM
Longview Fool Image

As of 1 p.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was up 81 points, or 0.50%, the S&P 500 rose 0.59%, and the Nasdaq climbed 0.95%. The across-the-board rise in the U.S. stock indices come amid continued calm in the Russia-Ukraine dispute over Crimea and after positive economic data was released this morning. The Consumer Price Index rose just 0.1% in February, following a 0.1% rise in January and a 0.2% increase in December. This is a sign that inflation is under control, despite all the stimulation the Federal Reserve has been giving the economy. Low interest rates will typically cause inflation to rise, but we have yet to see that happen, which likely means the central bank will continue stimulating economic growth.

The biggest mover within the Dow today is Microsoft (NASDAQ:MSFT), as shares were up more than 3.7% following reports that the company would release a new version of Microsoft Office that will run on Apple's iPad.This would open a whole new market for the company to sell software, which should help offset faltering sales due to consumers' shift from PCs to tablet and mobile computing. Software has always been Microsoft's bread and butter, so seeing the company attempt to improve that part of its business is very reassuring.  

One Dow component not having as good of a day is Wal-Mart (NYSE:WMT), as shares are basically flat. The stagnant share price seems a little odd after the giant retailer announced this morning that it would roll out a video game trade-in program. Beginning March 26, more than 3,100 Wal-Mart stores nationwide will accept old video games in exchange for Wal-Mart gift cards. The move is an attempt to draw in customers who otherwise would be going to places like GameStop (NYSE:GME). Shares of the video game specialty store are down 4% this afternoon on the announcement. Many have pointed to GameStop's quarterly results as a reason why it makes sense for Wal-Mart to get into the business. GameStop reported that 18% of its holiday shopping sales were pre-owned games, and that its first-quarter gross margin for the recycled games will range from 46% to 49%. These figures indicate there is a profitable market for used games. However, Wal-Mart is already so large that the additional revenue from used games will not be likely to move the needle. Still, this may help improve overall traffic to stores, which could result in noticeably higher sales.  

Outside the Dow, shares of fashion designer Michael Kors (NYSE:KORS) are trading lower by 2.3% after Barclays hit the stock with a sell rating and an $85 price target. Since going public more than two years ago, Michael Kors has been a great momentum trade as it seemed everyone was rallying behind the company. The Barclays rating is one of the first negative opinions released about the Kors, meaning the stock will likely experience a little more downward pressure from this report than we would otherwise see. For long-term investors the company is still growing rapidly and looking healthy. While the stock may be overvalued today based on current fundamentals, I believe the company still has a long road ahead and therefore I will be holding on to my shares.  

Want more out of your investments?

It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Matt Thalman owns shares of Apple, Michael Kors Holdings, and Microsoft. The Motley Fool recommends Apple and Michael Kors Holdings. The Motley Fool owns shares of Apple, GameStop, Michael Kors Holdings, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers