Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
After five straight losses, the Dow Jones Industrial Average (^DJI -0.12%) finally managed a win today, as a series of strong economic reports was enough to overcome the malaise of the dual Washington crises, the looming government shutdown, and the debt ceiling. By the end of the session, the blue chips had gained 55 points, or 0.4%.
Initial unemployment claims were unexpectedly low for the third week in a row, coming in at 305,000, its best mark in six years. With the four-week moving average down to 308,000, new jobless claims are essentially in line with their pre-recession levels, indicating that the unemployment rate should continue coming down. Elsewhere, the third and final estimate of second-quarter GDP matched the second estimate, at 2.5%. Considering the first estimate was just 1.7%, and economists are expecting only a full-year growth rate of 1.5%, the recent estimate seems like a good sign. Finally, August pending home sales fell 1.6%, but that was better than expectations of a 2.3% decline. With mortgage rates rising, the housing recovery is expected cool off, but a slower decline than estimated is still good news.
In its debut earnings report as a Dow member, Nike (NKE 1.55%) shined, gaining 6.3% after hours. The apparel giant said profit jumped 38%, and overall revenue increased 7.7%, to $6.97 billion, slightly ahead of estimates at $6.96 billion. Earnings of $0.86 per share soared past the analyst consensus at $0.78. The strong quarter was paced by North America, while revenue declined 3% in China. As one of the world's largest consumer discretionary companies, Nike is seen as a bellwether of worldwide consumer spending. The results seem to indicate a continuing recovery at home, and a European economy that may be finally awakening as future orders were particularly strong in both regions.
Meanwhile, Cisco Systems (CSCO -0.27%) was the worst performer on the Dow, falling 2.7%. The drop could have been related to comments from CEO John Chambers about the potential of cheaper "white label" routers, and other equipment that could commoditize Cisco's industry. Top-line growth has slowed to just 5% for the networking leader as it struggles to find new opportunities, and Wall Street is expecting just a minimal EPS increase this year.
Finally, outside the Dow, J.C. Penney (JCPN.Q) surprised the market after hours with a secondary stock offering announcement of 84 million shares, which would raise nearly $1 billion. Rumors had been swirling in the last few days that the ailing retailer would soon need cash, but the market expected a debt issue, not an equity sale. Shares were off 5% on the news. The stock offering, which comes with shares at a 13-year low, and after management attempted to reassure investors earlier today, is only the latest sign that Penney is in dire straits.
