Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Dow Slumps 114 on Fed Guidance, Zulily Stumbles

Just a day after every single sector in the stock market posted gains, all 10 sectors finished in the red. Newly appointed Federal Reserve Chairwoman Janet Yellen took Wall Street by surprise Wednesday, as the central bank said interest rates may rise even if the jobless rate doesn't improve much. While the Fed is concerned that inflation could get out of hand unless rates gradually rise, neither Wall Street nor Main Street are enthralled with the idea of rising borrowing costs. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) shed 114 points, or 0.7%, to end at 16,222.

Walt Disney (NYSE: DIS  ) lost 1.8% Wednesday, as it continues to be one of the most volatile stocks in the blue chip index. Disney shares have caught fire in the last few years, and have rewarded investors with 42% gains in the last 12 months alone. While I myself am a staunch believer in the company's vision, execution, and unmatched portfolio of intellectual property, businesses and stocks are different beasts. The P/E of Disney's stock has steadily expanded in the past two years, from about 16.5 to about 22.5. Investors are paying 36% more for every dollar of Disney's earnings than they were a couple years ago; if that multiple starts making its way back down to earth, shareholders will feel the pain. 

Ulta Salon, Cosmetics, & Fragrance (NASDAQ: ULTA  ) investors can testify to this pain firsthand. Stock in the beauty retailer cratered 20% on a single, cold December day after quarterly earnings disappointed. In a matter of months, Ulta's P/E halved, going from 54 to 27, sending the stock down nearly 40% in the process. With expectations hopefully under control now, the stock trades at 32 times earnings, and is up more than 10% since reporting an impressive quarter last Friday. Shares continued their post-earnings rally, adding 2.7% Wednesday. 

Finally, shares of Zulily, Inc. (NASDAQ: ZU  ) didn't take well to the downturn today, shedding 4.7%. Here again we should be careful to separate the company from the stock price: the company is on an absolute tear, growing sales from $18 million in 2010 to nearly $700 million in 2013. Zulily came out of nowhere in just a few years, finding success as a niche, mom-facing flash sales e-commerce site. But this flash sales all-star could be just a flash in the pan, a risk that might not be fully factored in to the stock's valuation, with shares exchanging hands at 132 times next year's projected earnings.

The Motley Fool's 3 stocks to own forever
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 (2)

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: 2882567, ~/Articles/ArticleHandler.aspx, 8/31/2015 11:26:37 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...

John Divine

Fool since 2012, unique fingerprints since birth. Age 7: Put lifetime savings ($18.37!) in the bank, became disillusioned with low interest, and a fascination with the stock market was born.

Today's Market

updated Moments ago Sponsored by:
DOW 16,506.55 -136.46 -0.82%
S&P 500 1,976.48 -12.39 -0.62%
NASD 4,793.24 -35.09 -0.73%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/31/2015 11:11 AM
^DJI $16505.73 Down -137.28 -0.82%
DIS $101.55 Down -0.93 -0.91%
Walt Disney CAPS Rating: *****
ULTA $159.21 Up +0.21 +0.13%
Ulta Salon, Cosmet… CAPS Rating: ****
ZU $17.78 Down -0.06 -0.34%
Zulily CAPS Rating: **