Led by tech and telecom stocks, the market rallied after a two-week slide. The festive year-end upturn marked one of the largest bounces in several weeks, as all three market indexes rose over 2%.
Several media outlets called this a "Santa Claus" rally after an analyst commented on a jump in retail stocks. The sector is banking on a last-minute jump in sales, as consumers head to the stores in the remaining few days before Christmas.
In today's Motley Fool Take:
- No Penneys for Wal-Mart
- Quote of Note
- Reg FD Reverberates
- Shameless Plug: Get More From Your Savings
- The New Nasdaq 100
- Discussion Board of the Day: Index Funds
- Which Index Fund?
- Quick Takes: Diageo PLC, Goldman Sachs, Credit Agricole, more
- And Finally...
Two discount giants tell different stories today, underscoring the wishy-washiness of this year's holiday shopping outlook.
Penney's sales and demand are ringing up ahead of its expectations so far this month -- even more evidence that the company's turnaround plans are solidly progressing. It expects a low single-digit comps gain for December and anticipates more customers will realize "it's all inside" for the last-minute shopping crunch this weekend.
Wal-Mart's week didn't go as planned, however, with sales trending at the low end of expectations. It attributes the relative weakness to customer procrastination and looks forward to a flood of shoppers as Christmas approaches. The retailer isn't budging on its outlook, and still predicts comp sales will increase 3% to 5% for December.
What will the end story be? Will Penney's results stay strong? Will Wal-Mart's aisles fill with people come next week? The University of Michigan's consumer sentiment index painted a rosy scene of shoppers apparently feeling more festive this month than last. Whether those cheery thoughts will translate into actual buying remains to be seen.
"As we struggle with shopping lists and invitations, compounded by December's bad weather, it is good to be reminded that there are people in our lives who are worth this aggravation, and people to whom we are worth the same." -- Donald E. Westlake, American novelist
The media speculated his resignation was tied to the SEC's finding that he had violated Regulation FD by telling analysts in February 2001 that their first-quarter estimates were too high. This selective disclosure came one day after a Web broadcast in which he gave no such guidance.
We first wrote about this shortly after the incident, suggesting it would be a good first case for the SEC to prove Reg FD has some teeth. Unfortunately, although the agency concluded they violated the policy, Raytheon and Caine got off with a slap on the wrist. Without admitting guilt, they agreed to "cease and desist" what they didn't have to admit doing, along with the curious punishment of also admitting "the jurisdiction of the Commission over them and over the subject matter of these proceedings."
Still, that incident -- along with the fact Raytheon has struggled, while defense rivals Lockheed Martin
While we urge stronger sanctions from the SEC in future Reg FD cases, it's nice to know that even a wrist slap can have some positive effects.
You can't put all your money in the stock market. Sometimes you need a safe, guaranteed return. So what are your options? Our Short-Term Savings Center can help you figure out how much you need to save, where to put it, and where to get the best interest rates. There's even some special yields for Fools.
It's in with the old names and out with the new tech stocks for the Nasdaq 100, as consumer brands take over the indexing space of their fallen, over-the-counter tech brethren.
Yes, it's mid-December again. That means the Nasdaq reconfigures its 100 stock index. Because the list consists of select choices among the 150 largest Nasdaq-listed companies, the annual rite of adjustment tends to favor stocks and industries that have outperformed the market over the past year.
Who's moving in? Fifteen new stocks this year, including Expeditors International of Washington
While it's not the oft-quoted Nasdaq Composite, the Nasdaq 100 is a meaty collection of equities. Nearly two dozen index funds mirror the holdings and its own Nasdaq 100 Index TrackingStock
Of course, the Nasdaq isn't being renamed the Index 115 so it has to make room for the new stocks. While one of the dearly departing, Rational Software
Yes, between dental supplies and a dog-chew retailer, the new list has some bite.
Are you following the changes to the Nasdaq 100, or do you index without giving much thought to the stocks involved? Is there more to selecting an index fund than low expenses? All this and more -- in the Index Funds discussion board. Only on Fool.com.
If you're ever looking for some Foolish musings but can't get to Fool.com (perhaps your dog ate the F on your keyboard), visit the Dallas Morning News website (registration required) and read what Scott Burns has to say.
Here's a guy full of all kinds of good insights (not to mention his Couch Potato Portfolio). In a recent article, "Index funds not created equal," Burns quotes some interesting stats:
- Twenty years ago, there were just two index funds: the Vanguard 500 Index fund and the Vanguard Small Cap Index fund. Today, there are 678 index funds, 544 of which invest in domestic stocks.
- The average expense ratio (i.e., how much the fund charges each year to cover administrative costs) for the domestic index funds is 0.76. Many index funds sport expense ratios that far exceed those charged by their actively managed peers.
- Portfolio turnover in domestic index funds averages 95%. In other words, only 5% of the investments in a fund are still there a year later.
The theory behind index investing is that it's a simple way to benefit from the growth of the overall stock market. It's no-brainer, couch-potato investing. But it's not so simple when there are hundreds of funds to choose from. So what's an investor to do? Let's hearken back to why index investing works.
Two of the biggest reasons to invest in an index fund are low costs and low taxes. Many index funds charge 0.20% a year to operate and keep turnover to a minimum (which reduces taxes to fund shareholders). There's no reason to choose an index fund that charges 0.76%. That's like buying an umbrella with holes.
How big of a deal is paying an extra 56 basis points a year? Over the long term, it can make a noticeable difference. Over 20 years, a $10,000 investment growing at 10% would be worth $73,281. However, that investment earning 56 basis points less each year would be worth just $65,575.
Then there's the question of which kind of index fund to choose -- an S&P 500 fund? A Russell 2000 fund? The Nasdaq 100?
If you're truly going for autopilot investing, look for a total market fund, such as one based on the Wilshire 5,000 (which, despite its name, has more than 6,500 companies in its index). Though it has 6,000 fewer companies, the Standard and Poor's 500 is also a good barometer of the overall market.
For more on index investing, visit our 60-Second Guide.
French bank Credit Agricole has made a bid to buy French bank Credit Lyonnais in a $20 billion cash-and-stock deal. If this goes through, it will create one of Europe's biggest financial institutions with market share of 32% in French consumer deposits, dwarfing the next-biggest competitors, BNP Paribas and Caisse d'Epargne, which each sport market shares of 11%. Oo-la-la!
The Consumer Federation of America (CFA) is taking issue with the FCC's inclination to ease restrictions on media companies, which would thereby permit further consolidation. Jeffrey Chester, director of the Center for Digital Democracy, is quoted as saying, "The stakes for the nation are huge." He also explained, "Convergence of communications and mass media in digital networks increases the power of the media, and the threat that concentrated control of the media in the hands of a few corporations will destroy the people's First Amendment free speech rights." According to The Washington Post, the FCC is planning a hearing in February to get public opinion on its media ownership review.
Remember the rumors shot down by Warren Buffett that he was thinking of buying Burger King? Well, he didn't buy it. British liquor giant Diageo PLC
"Can a Bloodied S.E.C. Dust Itself Off Now and Get Moving?" That's the question posed in a New York Timesarticle (free registration required), which describes an underfunded and overburdened agency facing many issues and changes. It noted that the SEC is leaning toward suing accounting firms rather than their partners for serious violations, which would represent a change in direction. Also, incoming SEC chief William Donaldson appears to not be a big fan of Regulation FD, which prohibits selective disclosure of information by public companies. One expert is quoted as saying, "This is the year in which the agency defines itself for the next decade."
A Washington Postarticle describes a looming shift in American tax policy, as the Bush administration seems poised to transfer more taxes from the richer to the poorer. That might seem a hard sell, but it's less so when you choose to not classify payments made by workers into the Social Security system as taxes, since they're recouped as benefits later on. With such taxes removed, it suddenly looks like the non-rich are paying a lot less in taxes. (Not counting these taxes as taxes might puzzle some Fools, though, since many other taxes of ours result in benefits with tangible value, such as the military, police, free public schools, and so on.)
Today on Fool.com: Matt Richey says don't judge a stock by its cover. First impressions can be risky business.... Jeff Fischer argues that when it comes to ethics, Citigroup is bankrupt.... In Fool's School, should you consider pre-need funeral arrangements?... And the Post of the Day: dissecting Costco.
Bob Bobala, Robert Brokamp, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Jackie Ross, Reggie Santiago, Dayana Yochim