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.
A surprising thing happened this morning: The U.S. Labor Department released its January jobs report, and the number of 113,000 was much lower than the anticipated 189,000 that most economists were expecting. But, instead of the major indexes tanking on that news, they rose, and all three of the major indexes finished the day up more than 1%. The Dow Jones Industrial Average (DJINDICES:^DJI) closed the day up 165 points, or 1.06%, while the S&P 500 rose 1.33% today, and the Nasdaq jumped 1.69% higher.
While the pundits and analysts had all sorts of different reasons why the markets reacted the way they did to a weaker-than-expected jobs number, the fact of the matter is, the unemployment rate is now down to 6.6%. The labor force participation rate increased in January to 63%, up from 62.8% in December. All these numbers mean the economy is getting stronger.
Furthermore, the increase to the labor force participation rate means that more Americans are working, and one would assume that would lead to a strong performance by the large consumer-driven stocks today. While that certainly was the case for most of them, Coca-Cola (NYSE:KO), arguably one of the largest consumer-driven companies, missed the rally. Even more intriguing about the move lower was that there was very little news pertaining to the stock today that would have caused the move lower. But one story making headlines again today, and has for a number of weeks, is the fact that Coke is one of the largest and most notable sponsors of the Winter Olympics.
Coke has been sponsoring both the winter and summer games for years, but the bad press surrounding this year's games has now found its way onto the sponsors. For the past few months, protestors have been raising the gay rights issue within Russia and, while a number of Western leaders declined to attend the Winter Olympics based on the hosting country's political views pertaining to this issue, the major sponsors, such as Coke, never seemed to blink an eye about attaching their names to the games. While Coke certainly does not agree with the laws and beliefs Russia has in terms of human rights, many are saying Coke should have made a stance here and not supported the event.
Another consumer-facing company, but a slightly dirtier one than Coke, is Republic Services (NYSE:RSG), which had a good day on the market. Shares of the garbage company rose 4.8% today after the company announced earnings after the closing bell. Sales came in at $2.14 billion, above the $2.02 billion reported for the same quarter last year. Earnings hit $0.65 per share, again much higher than the $0.35 per share the company reported for the same period in 2012. Furthermore, while the company beat estimates on revenue, it beat earnings expectations by $0.07 per share. One reason for the better-than-expected results was a 2.5% volume increase, some of which can be contributed to a healthier housing market this year as opposed to last. More homes being built means more trash not only from construction, but from the new residents moving in.
The increase in volume and better-than-expected results for Republic Services is likely one reason why shares of competitor Waste Management (NYSE:WM) experienced a strong rise of 1.83% today. Waste Management is expected to report earnings on February 18. Analysts are expecting the companyt to report sales of $3.58 billion and earnings per share of $0.60 this quarter, but compared to what Republic Services posted and what was being estimated, those figures may be way low.
But before you go out and buy Waster Management based solely on what its competitor did, it may not be a wise move. Republic Services may have simply increased volumes due to taking business away from Waste Management. Or it may operate in an area that experienced growth, and its competitors will not benefit the same way. Always base your buy and sell decisions on company-specific information, not on an industry trend.