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 displaying a defiant confidence via its four-day bull run, Wall Street wasn't able to justify any further gains on Tuesday, as a budget and debt ceiling deal wasn't reached by day's end. With rumors in the air that ratings agencies could downgrade U.S. debt as early as this evening, Fitch put America's AAA rating on "rating watch negative," just after the market closed. Home-improvement retailer Home Depot (HD +0.51%) ended as the Dow Jones Industrial Average's (^DJI +0.20%) largest decliner, as the index shed 133 points, or 0.9%, to end at 15,168.
Home Depot had some credit rating news of its own on Tuesday, as its corporate credit was upgraded by S&P, which added that the outlook is now stable on the company's ratings. You wouldn't think that investors would still sell off a stock after good news like this, but it was an uphill battle for equities today, with seven out of every 10 stocks declining. After shedding 1.5%, Home Depot ended as the worst performer in the Dow, despite the company's envious positioning as a beneficiary of a continued real estate recovery.
Elsewhere in the services sector, Expedia (EXPE +1.56%) lost 1.3%, as shares extended yesterday's precipitous fall. The 6.2% slide on Monday was spurred by a downgrade from an analyst who questioned the new management at the Expedia-owned Hotels.com. The competition has also been heating up in the online travel and lodging services arena, and frankly, investors should be wary of any investment in businesses like these, as barriers to entry are relatively low.
Lastly, Rite Aid (RAD +0.00%) was one stock in the service sector that didn't find itself in the red Tuesday, adding 0.8%. That's nothing new for longer-term shareholders, who have seen the stock soar, gaining more than 540% in the past five years. The company's outperformance is a bit counterintuitive, since Rite Aid has hovered around $26 billion in annual sales for its past five fiscal years. At the same time, however, Rite Aid's been able to reduce costs, boost margins, and swing to a profit -- three things investors love to see.
