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.
The Dow Jones Industrial Average (^DJI -1.64%) spiked early and then gave up most of the gains by midday, and as of 2:45 p.m. EDT it has gained 19 points, or 0.13%. Investors had some reason for optimism, as initial unemployment claims fell 5,000 last week to 305,000; economists expected claims to come in close to 330,000. The third estimate of second-quarter GDP growth came in at 2.5%, and pending home sales fell 1.6% in August, which marks the third consecutive month of declines. Economic news aside, here are the movers and shakers in the market today.
Nike (NKE -1.86%) is the second-biggest gainer in the Dow today, up 1.3% in advance of its earnings report due out this afternoon. Investors seem optimistic that earnings-per-share estimates of $0.78 is a reachable goal. Investors will be expecting improvement from Nike's growth in China, as well as other emerging markets. One positive catalyst for Nike in emerging markets is the sponsorship of the 2014 FIFA World Cup in Brazil, which should give its sales some extra momentum across the globe.
Leading the Dow's losers today are two tech giants, Cisco (CSCO -0.54%) and Intel, both down more than 2%. Cisco CEO John Chambers dropped by Barron's offices earlier today and commented about the biggest threats to his company, among other topics. Chambers considers service providers that buy cheap "white box" routers and switches to be one of Cisco's biggest threats, if not the biggest. "We think if you're going to win on this, versus white label, which will be our competitors three to five years out, or Amazon.coms, you have to win on architecture," Chambers told Barron's editors. While cheaper routers and IT services could bring margin pressure on Cisco's operations going forward, the company remains well positioned in its core markets. As Internet traffic continues to grow demand for Cisco's networking gear should follow.
Outside of the Dow, Bed Bath & Beyond (BBBY) is up more than 4% today after delivering a solid second-quarter performance. Bucking retail trends of late, Bed Bath & Beyond posted comparable sales growth of 3.7% and reduced margin pressure. Operating margins contracted 30 basis points to 13.8%, which was an improvement over last quarter's 170 basis point decline. The company has added 500 net new stores over the last seven years and emerged from the housing collapse in pretty good shape. It still has plenty of room for growth. The key for investors watching this company will be its margins going forward. If it can improve store traffic and fine-tune its marketing to optimize sales, margins could improve. If it fails to do so, and online competition increases, operating margins may never get back to the 16.5% seen in 2012.
