Dow Jones Today Recovers to 16,000
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.
The Dow Jones Industrial Average jumped up 53 points, to 16,017, as of 1:30 p.m. EST, after some mixed economic releases and earnings from Cisco that missed expectations. The S&P 500 was up eight points to 1,827.
Cisco reported second-quarter earnings yesterday after the market close that have sent the stock down 4% to $22. The networking specialist reported net income of $1.43 billion for earnings of $0.27 per share, down slightly more than 50% from last year's $0.59 per share, or $3.14 billion. Earnings were hurt by a $655 million charge related to a memory chip problem, which cut per-share earnings by $0.12. Adjusted earnings, which don't include one-time charges, was $0.47 per share, just above analyst expectations of $0.46 per share.
Revenue was down 8% to $11.2 billion from $12.1 billion in the year-ago quarter, but was still above analyst expectations of $11 billion. Cisco expects revenue to continue falling another 6%-8% in the current third quarter.
It wasn't all mediocre news, Cisco announced it had repurchased 185 million shares in the most recent quarter at an average price of $21.73 per share, for a total purchase of $4 billion. The company also said it would increase its quarterly dividend from $0.17 per quarter to $0.19, a 12% boost. At the current price the forward yield is now 3.45%.
There were three U.S. economic releases today.
Weekly new unemployment claims
Retail sales ex-autos
The one to pay attention is retail sales that unexpectedly dropped a seasonally adjusted 0.4% in January; economists had expected retail sales to fall just 0.1%. Also important to note, December retail sales had previously shown a 0.2% growth in the Department of Commerce's first estimate, but the number was revised downward to a 0.1% drop for the month. Pulling retail sales down were automobile sales. Excluding automobile sales, U.S. retail sales were flat in January, but still slower than December's 0.3% growth. The news of weaker December and January retail sales, coupled with the past few months' weak job reports, likely means the economy has not grown as fast as previously expected for the fourth quarter of 2013 or the first quarter of 2014, where the initial estimate and current expectations are 3.2%. and 2.3%, respectively.
So what can an investor do in times like this? The stock market is overvalued, and earnings look cyclically high. That said, predicting where the broad market will go in the short term is a game for fools (with a lowercase "F"). Stocks can always get more overvalued. When things get frothy, it's worthwhile to build up some cash on the side for when prices inevitably fall.
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The article Dow Jones Today Recovers to 16,000 originally appeared on Fool.com.Dan Dzombak owns shares of Cisco Systems. The Motley Fool recommends Cisco Systems. 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.
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