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.
While it seems earnings are on investors' minds more so than anything else today, the major indexes all lost a little ground after the Dow Jones Industrial Average (^DJI -0.98%) set a new all-time record high yesterday. The Dow closed today off by 61 points, or 0.39%, while the S&P 500 fell 0.49% and the Nasdaq shed 0.55%.
But while earnings may be attracting most of the attention the past few days, this morning the Federal Reserve started its two-day October meeting and will be deciding whether it should begin tapering its bond buying or keep things as they are for at least another month. The lack of media coverage on the topic seems a little odd due to how overplayed the past few meetings have been, but is likely due to the belief that the Fed will not change anything and hold off on tapering until at least November, if not the beginning of 2014.
While the major indexes all moved lower today and while a good bit of the market will be affected by the Fed's decision to taper or not, however, Home Depot (HD -0.31%) is one company that will almost certainly feel the impact of higher interest rates faster and more tangibly. And since most investors, analysts, and economics are predicting the Fed to not make any changes this month, shares of Home Depot traded higher by 0.49%, making it the Dow's second-best performer of the day. Furthermore today's rise comes after the stock increased by nearly 1.9% yesterday despite any major news relating to the company on either day. The thought process behind the moves are that with lower interest rates, more homes will be sold and thus more new homeowners will flow into the stores and spend money. While it all sounds good, the long-term investor shouldn't worry about rates today or a month from now, because eventually they will be higher. Thus, there is no real point to trade shares of Home Depot today based on what rates will be like next week.
Another Dow component that had a good day was Nike (NKE -0.74%), which rose 0.29%, enough to make it the third-best Dow component of the day. Shares received a boost after an analyst at Morgan Stanley increased the stocks rating from equal weight to overweight today and bumped the price target to $85. The reason for the upgrade was that the analyst believes investors don't fully understand the power and strength of Nike's balance sheet and that the company will likely be able to maintain earnings-per-share growth of 17% annually for the next three years.
Nike wasn't the only apparel company having a good day because of analyst changes. Shares of Michael Kors (CPRI -1.67%) rose 0.78% after Maxim told investors that it expects the company to maintain strong comparable-sales figures in the near term as the company continues to open new stores. Maxim initiated coverage of Kors today with a buy rating and a $99 price target, which is 26.95% higher than were shares closed today after the slight move upwards.
I have said it before and I am sure to say it again: Take analysts' opinions, ratings, and especially price targets with a grain of salt. They are just estimates, opinions, and beliefs -- not facts and sometimes fiction. These analysts have nothing to lose when they make a call, so don't put all your money on the line based solely on their comments.
