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.
Today's U.S. economic data certainly didn't seem to align with the up move in the broad-based S&P 500 (SNPINDEX:^GSPC) -- but today was anything but normal.
The big report that all investors had their eye on was weekly initial jobless claims, which rose 13,000 from the prior week to an annually adjusted level of 336,000. Although we would prefer to never see this figure go up, 336,000 is still historically low over the past six years and would certainly lead to the potential for the unemployment rate to fall further. Nonetheless, today's big move higher in the S&P 500 is a bit odd given this news.
What we can really chalk up under the "odd" file is the Nasdaq Composite's (NASDAQINDEX:^IXIC) trading, which was halted for some three hours today after software related to quote dissemination at the composite failed to work properly. This might mark the first time I can ever recall there being an index halt over which investors didn't panic and send the markets lower. As I said, it was a really odd day.
When all was said and done, the S&P 500 had climbed by 14.16 points (0.86%) to close at 1,656.96. This was the S&P 500's biggest gain over the past three weeks.
Topping the charts today was video game and accessories retailer GameStop (NYSE:GME), which gained 9% after reporting market-topping second-quarter earnings results before the opening bell. For the quarter, GameStop's revenue fell 11% to $1.38 billion as it delivered EPS of $0.09. Both figures handily topped the $0.05 in EPS and $1.36 billion in sales the Street had expected. The big boost came from a shift to mobile gaming, where revenue rose 121%, and from the anticipated release of two new gaming consoles -- the Xbox One and PlayStation 4. On the heels of this gaming excitement, GameStop boosted its full-year EPS to a range of $3 to $3.20 from its prior forecast of $2.90 to $3.15 and now anticipates same-store sales growth will come in between a decline of 3.5% and growth of 1.5%, as compared with previous guidance for a decline of up to as much as 5%. While great news for current shareholders, I still see this as a textbook case of "buy the rumor, sell the news." I'm concerned at its current valuation that investors' excitement will quickly fade once these gaming consoles are out and would suggest current investors consider that possibility.
Global miners also had a particularly strong day, with iron ore miner Cliffs Natural Resources (NYSE:CLF) and coal miner Peabody Energy (NYSE:BTU) rising by 5.8% and 6.2%, respectively. For Cliffs -- and more than likely Peabody as well -- the move seems to correlate to the Flash HSBC Purchasing Managers Index in China, which came in with a reading of 50.1, a four-month high and a nice rebound from the lowest level in 11 months that it hit in July. Any reading above 50 signals expansion, and, if anything, this reading for August would suggest that China's manufacturing sector is stabilizing. That's great news for Cliffs, which is counting on iron ore demand to spur its bottom line and help stabilize iron ore prices.
For Peabody, in addition to this positive China PMI data, it also dealt with a potentially negative appellate court ruling that it would indeed be liable for the pensions of some 3,100 Patriot Coal retired workers. Under normal circumstances I'd consider this bad news, but the court ruling didn't exactly stipulate how much Peabody would be liable for, opening the door for a potentially small sum.