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 government shutdown remains in effect. The feed from the cherished Panda Cam at the National Zoo is still eerily dark. And yet the stock market rose on Friday in the face of this panda-deprived nightmare known as the government shutdown, which entered its fourth day. Speaker of the House John Boehner soothed Wall Street, assuring the public that Congress wouldn't allow the United States to default on its debt later this month. Wall Street took Boehner at his word, and the S&P 500 Index (^GSPC -0.10%) tacked on 11 points, or 0.7%, to end at 1,690.
While investors may still have some naïve faith in the U.S. government, no such faith exists in J.C. Penney (JCPN.Q), which shed 6.5% Friday. In fact, if there's a surefire sign that hopeful investors are rushing to the exit, record-high prices of J.C. Penney credit default swaps -- or CDSs -- might be the cue. A CDS is essentially a form of insurance for debtholders if the company defaults, and right now insurance costs about a quarter for every dollar of J.C. Penney debt you'd like to insure.
There's no guarantee the iconic department store company actually will go under, of course, but there sure are a lot of rumors to that effect. The only thing that's certain is that this stock will continue to be wildly volatile in the short term, and ideally should be avoided as a long-term investment until its future clears up.
Beauty care giant Avon Products (AVP) fell 1.5% Friday, also ending as one of the weakest index performers. Avon isn't close to being the financial wreck that J.C. Penney is, but it's not exactly an ideal business either. After boasting nearly $900 million net profit in 2008, the company has made less and less each year, actually swinging to a net loss in 2012. Investors will have a better idea of what to expect in the fourth quarter when third-quarter results are announced just before Halloween on Oct. 28.
Lastly, Clorox (CLX 1.13%) lost 1.4% today. The good news with this consumer goods stalwart is that business is stable, and steadily on the rise. The bad news for investors, however, is also the stability of the business. Clorox's revenue is painfully predictable, rising or falling by less than 6% per year each of the last four fiscal years. One thing you can't knock the company for is its willingness to pay a dividend, sitting at 3.4% now, as well as its long-term focus: Clorox's annual report details a number of goals for as far out as 2020.
