Mixed Economic Data Has Markets Falling

Mixed Economic Data Has Markets Falling

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.

As of 12:45 p.m. EST, the Dow Jones Industrial Average is down 42 points, or 0.27%, while the S&P 500 is off by 0.32%, and the NASDAQ has lost 0.15%. The major indexes are lower today after mixed economic data hit investors, causing both fear and uncertainty to rise.

The ADP jobs report was released this morning, and it indicated that 215,000 new jobs were created in November, a figure much higher than the 173,000 economists had been expecting. But the Mortgage Bankers Association also reported that, for the fifth consecutive week, the number of mortgage applications fell. On the flip side, though, the Census Bureau reported that 444,000 single-family homes were sold in November, up from 354,000 in September, and higher than the 429,000 that had been predicted. And lastly, the Institute for Supply Management reported that its index had fallen to 53.9% down from 55.4%, which means that, while the economy is still growing, its pace slowed down in November from October.

These reports have increased the fear and uncertainty because they are rather mixed and don't paint a clear picture of what the Federal Reserve may or may not do with interest rates in the future. But that hasn't stopped rates from climbing slightly today, as the U.S. Treasury bond yield for three months doubled. The five-year yield, 10-year yield, and 30-year yield have all increased by six basis points today.

While most of the Dow components or stocks, in general, will not be terribly affected by higher rates, a few of the larger dividend-paying stocks, such as AT&T , may very well be hurt by higher rates. As investors were searching for yield when the Fed began lowering interest rates, stocks like AT&T (which paid dependable and large dividends -- current yield of 5.1%), began seeing their popularity increase. Although the telecom company doesn't experience a ton of share-price appreciation, its dividend and stable nature attracts investors looking to make a little more than the few percent they could make by buying Treasury bills at today's prices.

But when rates begin to rise again, and the super-safe Treasury bond is yielding an equal amount or, perhaps, even more than AT&T and other slow-growing dividend-paying stocks, investors will likely begin to flee, which will certainty hurt the share price. AT&T is lower by 0.45% today, which may be the result of investors pulling out prior to an interest-rate hike.

Another Dow component moving lower today is Home Depot , which is also affected somewhat by rising interest rates. As rates rise, the number of new home purchases may decline, as it will be more expensive to finance a home. That will hurt the new stream of customers rolling into Home Depot locations around the country looking to personalize their new properties. Additionally, the figures above, which indicate that new mortgage applications are lower, may be a sign that sales are already beginning to show signs of weakness, causing Home Depot to slide lower by 0.39% today.

More Foolish insight

As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love.

The article Mixed Economic Data Has Markets Falling originally appeared on Fool.com.

Fool contributor Matt Thalman owns shares of Home Depot. Check back Monday through Friday as Matt explains what causing the big market movers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Originally published