Why the Dow Hit a New Record As RadioShack Drops and CarMax Pops

Stocks finished modestly higher again today as the Fed's bullishness from earlier in the week overcame concerns about the crisis in Iraq. Though the gains were small they were enough to lift the Dow Jones Industrial Average (DJINDICES: ^DJI  ) and S&P 500 to record highs as the Dow finished up 0.15% or 26 points to close 16,947, and reached as high as 16,978 during the session nearing the 17,000 milestone. The S&P closed up 0.2% at 1,963, and the Nasdaq gained 0.2%.

As stocks continue to push further into record territory, many analysts have called for a market correction, but investor optimism seems to keep answering any sell-off as violence in Iraq spooked the market last week. Recent economic data has been strong as the labor market has made significant strides in the past few months, and the manufacturing sector has been expanding rapidly, following suit and driving cyclical stocks higher. There were no economic reports released today, but a a flurry of options expiration dates led to volume being higher than normal.  

Turning to individual stocks, CarMax (NYSE: KMX  ) were flying through the roof today, finishing up 17% on a strong earnings report. The car dealership chain beat estimates on both top and bottom lines as sales grew 13.3% to $3.75 billion, above expectations at $3.58 billion, while profits improved to $0.76 a share, easily beating the consensus at $0.67. Comparable sales increased 3.4% and the company showed strength in every key sales category with both retail and wholesale sales performing well. CarMax's unique approach of offering customers "no-haggle" pricing seems to be paying off, and the company should get a lift from the improving job market, which has helped lift car sales across the board. New store openings and share buyback program should also help boost results going forward as shares touched a 52-week high on the news.

RadioShack (NYSE: RSH  ) , meanwhile, finished down 10% today as the stock crossed the $1 threshold for the first time. The $1 point is seen as a low-water mark of viability among investors. The sell-off seemed to be prompted only by shares falling below $1 as the electronics retailers has received multiple analyst downgrades, and shares have fallen 40% since it delivered a dismal earnings report last week. RadioShack plans to close unprofitable stores, but it can only close up to 200 of them, because of agreements with creditors, or it must file for bankruptcy protection. That requirement is only further hamstringing a company facing liquidity concerns with only $61 million in the bank. CEO Joseph Magnacca has tried to sell RadioShack's comeback potential, but after a huge loss and a double-digit decline in same-store sales in its most recent quarter, it seems unlikely that the chain will survive without a bailout from a lender or declaring bankruptcy. 

Will this stock be your next multibagger?
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.


Read/Post Comments (0) | Recommend This Article (1)

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: 3002859, ~/Articles/ArticleHandler.aspx, 9/17/2014 1:38:44 PM

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