The Dow Jones Industrial Average (^DJI +0.69%) is basically unchanged following some mixed economic reports, up six points as of 1:15 p.m. EDT. The S&P 500 (INDEX: ^GSPC) is also flat, down just more than a point. However, Cisco (CSCO +0.11%) stock is soaring today after beating earnings expectations.
There were four U.S. economic releases today.
|
Report |
Period |
Result |
Previous |
|---|---|---|---|
|
Weekly new unemployment claims |
May 4 to May 11 |
360,000 |
328,000 |
|
Consumer Price Index |
April |
(0.4%) |
(0.2%) |
|
Core CPI |
April |
0.1% |
0.1% |
|
Housing starts |
April |
853,000 |
1.02 million |
|
Building permits |
April |
1.02 million |
890,000 |
The reports were mixed today. Weekly new unemployment claims jumped to 360,000. Unemployment claims can be volatile, which is why it's better to follow the four-week moving average, which is now up by 1,250 to 339,250. Last year new unemployment claims averaged 360,000 to 370,000, but they've been moving steadily lower this year.
Hopefully, the jump is no more than a blip and new unemployment claims will continue their downward trend.
The Consumer Price Index fell in April. This was expected, as the prices of commodities, particularly oil, dropped significantly during the month. Core CPI is up just 0.1%. Over the past 12 months, inflation is up 1.1%; despite the efforts of the Federal Reserve, it remains below its target of 2%. This is because demand for loans from banks remains low as consumers and businesses deleverage.
Finally, housing starts were down to a seasonally adjusted 853,000, far below analyst expectations of 965,000. However, building permits rose to a seasonally adjusted 1.02 million, beating analyst estimates. Building permits are a leading indicator of future housing starts. The rise in building permits, combined with yesterday's news that homebuilder confidence rose this month, is good news for the continued strength of the housing market.
Today's Dow leader
While the market is down, there is one bright spot in the Dow: Cisco stock is up more than 12% after the company released earnings after yesterday's market close. Cisco reported that earnings per share excluding one-time items grew 6.3% to $0.51, besting analyst expectations of $0.49. Revenue rose 5.2% to $12.22 billion, beating expectations of $12.18 billion.
Investors had been lowering their expectations for Cisco since competitor Juniper Networks (JNPR +0.00%) reported weaker-than-expected earnings. Cisco has now reported record revenue for nine quarters in a row. Going forward, Cisco expects EPS of $0.50 to $0.52 for its fiscal fourth quarter. The company expects revenue growth of 4% to 7% to between $12.16 billion and $12.51 billion.
While Cisco stock is up 42% over the past 12 months, the company remains a favorite of value investors. The company has a market cap of $126 billion, cash of $47.4 billion, and debt of just $13 billion. The company continues to return value to shareholders through a share buyback program and dividends. In the past quarter the company bought back $860 million in shares at an average purchase price of $20.85. The company also recently increased its dividend and now pays a $0.17 per-share quarterly dividend for a forward yield of 2.9%.
