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.
All three major indexes fell on Thursday, as institutional and retail investors alike admitted to not budgeting well for Halloween. "This is a classic Halloween panic sell-off," one analyst hectically told me over the phone. "People have delayed their candy purchases until the last minute -- now they've gotta pay for it. So they sell stocks," he lamented.
I'm just kidding. I made that up.
While the farfetched rationale above is unapologetically absurd, talking heads on television will often chalk up market movements to some equally nonsensical line of reasoning. Perhaps you've heard of the esteemed "Super Bowl Indicator" or the renowned "Hemline Theory," both of which claim to determine the direction of the market by examining Super Bowl winners and the length of women's skirts, respectively. Thankfully, there were some legitimate catalysts behind today's decline, which saw the Dow Jones Industrial Average (DJINDICES:^DJI) lose 73 points, or 0.5%, to end at 15,545 Thursday.
Two out of every three Dow stocks fell today, as consumer confidence ebbed, ending at its lowest level in more than a year. On top of that, jobless claims fell less than analysts expected last week, dropping by just 10,000 to end at 340,000. Considering that Wall Street was already peeved about the Fed's vague policy meeting yesterday, today's slump is understandable.
McDonald's (NYSE:MCD) stock raged against the bearish trend today, adding 0.5% to end as one of the Dow's few advancing components. The gains come in the wake of yesterday's surprise announcement that McDonald's will be teaming with Kraft Foods Group to bring McCafé coffee to a supermarket near you. Since launching in recent years, McDonald's coffee has proven to be one of the company's more successful initiatives. We'll see how the new strategy plays out, but since next year's rollout will only hit select cities as the fast food giant tests demand, it looks like a low-risk, high-reward situation.
Consumer services was the only sector to end in the black Thursday, and broadcasting company Media General (NYSE:MEG) didn't disappoint its sector, surging 10% after its third-quarter results. If you glanced at Media General's earnings compared to the same quarter a year ago, you'd probably be at a loss for words -- and not in a good way. That's because operating income plummeted from $22.5 million to just $8.2 million in the third quarter. Such a cursory examination, however, would be completely devoid of some important contextual details; for example, last year saw record political revenue, which can't be counted on year in and year out by any means.
Travel website Expedia (NASDAQ:EXPE) also roared higher today, tacking on a whopping 18% after an impressive quarter of its own. Expedia's rally also helped the services sector end higher today; a flurry of upgrades and bullish commentary from Wall Street firms helped compound the stock's returns, as the company blew past expectations. If there's an equivalent to the law of gravity in the stock market, it reads thusly: "No stock shall fall on a day in which herds of analysts rush to upgrade it and boost its price target." It's no Hemline Theory, but it sure makes a lot more sense.
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