Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
The Dow Jones Industrial Average (DJINDICES:^DJI) is poised to have another rough morning. Stock index futures as of 8 a.m. EDT indicate a 113-point drop at the opening bell after Wal-Mart's (NYSE:WMT) and Cisco's (NASDAQ:CSCO) quarterly results both spooked investors.
For its part, Cisco announced earnings last night that broadly met Wall Street's expectations. The network equipment maker's revenue rose by 6% to $12.4 billion. Profit grew even faster, by 10.6%, to reach $0.52 per share. However, Cisco's sales forecast for the coming quarter was surprisingly low, and the company announced plans to cut 4,000 more jobs.
CEO John Chambers told investors that the slow global upturn should continue to creep along but that "this recovery is more mixed and inconsistent than others I've seen." That inconsistency was evident in Cisco's global results. Emerging markets turned in a wide range of performances, with revenue growth from Brazil and Russia coming in flat, Chinese sales falling by 6%, and sales in India and Mexico rising by double digits. Cisco shares are up better than 30% this year, but they look set to give back some of those gains today: The stock is down almost 8% in premarket trading.
Closer to home, investors got two updates on the U.S. consumer that painted a mixed picture of the economic recovery. The Federal Reserve Bank of New York said auto loans jumped by $20 billion last quarter -- the largest gain in that category of consumer debt in seven years. As their total debt burdens have declined, consumers have shown an increasing appetite for big-ticket items including cars and homes. That's been great news for companies like Ford (NYSE:F), which boosted sales by 11% last month as it logged its best July since 2006.
But we aren't seeing consumer spending recover as strongly in other areas. Earnings results from Wal-Mart this morning showed that retail consumers are still under pressure. Echoing comments that Macy's made yesterday, the mega retailer said its customers are being extra cautious in their spending. Wal-Mart posted a traffic drop and shrinking sales growth in the U.S. It also dialed down its outlook for the rest of 2013. Wal-Mart now expects revenue to rise by 2% to 3% this year, down from its previous guidance of a 5% to 6% improvement. The stock is down 2.5% in premarket trading.