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.
Major indexes are falling in early afternoon trading following the release of a number of economic reports today and a few major earnings releases this morning. As of 1:05 p.m. EST, the Dow Jones Industrial Average (DJINDICES:^DJI) is down 77 points or 0.47%, while the S&P 500 is lower by 0.23% and the Nasdaq is flat.
Along with the release of the Federal Reserve's Beige Book late in the trading day Wednesday, today investors were hit with the National Association of Home Builders' report that builder confidence in the market for newly built single-family homes fell from a reading of 57 last month to 56 in January. Not only that, but 30-year mortgage interest rates fell from 4.51% to 4.41% last week, which some believe is an indication that the U.S. economy is still not strong enough to support itself, hence the need more Fed economic stimulus.
The other big economic data point is the latest initial jobless claims number, which for last week fell by 2,000 claims to 326,000.
These mixed reports suggest that while the economy is getting stronger, it is happening at a very slow pace and certainly not at the rate investors want to see.
The nation's biggest banks have been reporting their fourth-quarter earnings this week, and this morning it was Dow component Goldman Sachs' (NYSE:GS) turn. While the bank did report better than expected earnings, it showed weakness in a few key areas, including client trading revenue, which came in 15% lower than last year. Perhaps more important was lower fixed income, both on the underwriting side and trading the asset. Goldman has relied on fixed income assets to produce strong revenue and profits in the past; now that this is an area it is struggling with, the bank may be headed for rough times. The problem for Goldman is that while the Federal Reserve continues to meddle with interest rates and economic reports remain mixed, the volatility within the bond markets will stay elevated, making it difficult to make money trading bonds.
Outside the Dow, shares of the controversial Herbalife (NYSE:HLF) are down 7.2% today as The Wall Street Journal reported that China will seek to determine whether Nu Skin (NYSE:NUS) is a multilevel marketing scam. Activist investor Bill Ackman called Herbalife the same thing and called for investors should short the stock. As far as we know, Ackman still holds his short position in Herbalife despite shares climbing higher after he announced his stance on the company. Both Herbalife and Nu Skin operate in the skin care and supplements business.