U.S. stock markets ended Wednesday trading mixed despite evidence that the Federal Reserve isn't about to pull away its support for the economy.
The Dow Jones industrial average (^DJI) lost 9 points, the S&P 500 (^GPSC) was essentially flat and the Nasdaq (^IXIC) rose nearly 17.
Minutes from the Fed's latest policy meeting showed that many members agreed last month that the job market's improvement would have to be sustained before the Fed reduced its bond purchases. Several felt confident that a pullback in bond purchases could occur soon.
Oil has risen about $12 a barrel, or 13 percent, in the past two weeks to the highest level since early May of last year. The spike initially was caused by turmoil in Egypt. In other commodities trading, the price of gold rose $4.76, or 0.4 percent, to $1,253.49 an ounce.
In regulatory news, the Securities and Exchange Commission voted to lift an 80-year-old ban on publicizing shares of hedge funds and other businesses that issue private stock. It's a move that is expected to transform how startups and investment firms raise cash.
Among stocks making big moves:
Shares of Apple (AAPL) fell $1.62, or 0.4 percent, to $420.73, after a federal judge in New York ruled that the company broke antitrust laws and conspired with publishers to raise e-book prices significantly in 2010. Apple disagreed with the court's finding and said it would appeal the ruling.
Hewlett-Packard (HPQ) rose 46 cents, or 1.8 percent, to $25.93 after a Citigroup (C) analyst raised his rating on the company. The analyst doubled his price target for the stock, saying the PC maker's turnaround efforts are beginning to take hold.
Fastenal (FAST), an industrial and construction supplies distributor, fell $1.33, or 2.8 percent, to $45.77. The company reported revenue for the second quarter that fell short of analyst estimates.
Swiss drugmaker Roche said it stopped studies of its diabetes drug, aleglitazar, because of safety concerns and a lack of evidence that the drug was working. Roche said an independent monitoring committee recommended that it stop the late-stage trial -- and halting all trials of the drug. Shares of Roche, traded on the over-the-counter market, gained 64 cents to $63.15.
What to Watch Thursday:
The Labor Department reports weekly jobless claims at 8:30 a.m. Eastern time.
Import and export prices for June are also released at 8:30 a.m. from the Labor Department.
Freddie Mac, the mortgage company, releases weekly mortgage rates at 10 a.m.
Treasury releases the federal budget for June at 2 p.m.
If You Only Know 5 Things About Investing, Make It These
Closing Bell: Stocks End Mixed Despite Fed Assurances on Stimulus
Warren Buffett is a great investor, but what makes him rich is that he's been a great investor for two thirds of a century. Of his current $60 billion net worth, $59.7 billion was added after his 50th birthday, and $57 billion came after his 60th. If Buffett started saving in his 30s and retired in his 60s, you would have never heard of him. His secret is time.
Most people don't start saving in meaningful amounts until a decade or two before retirement, which severely limits the power of compounding. That's unfortunate, and there's no way to fix it retroactively. It's a good reminder of how important it is to teach young people to start saving as soon as possible.
Future market returns will equal the dividend yield + earnings growth +/- change in the earnings multiple (valuations). That's really all there is to it.
The dividend yield we know: It's currently 2%. A reasonable guess of future earnings growth is 5% a year. What about the change in earnings multiples? That's totally unknowable.
Earnings multiples reflect people's feelings about the future. And there's just no way to know what people are going to think about the future in the future. How could you?
If someone said, "I think most people will be in a 10% better mood in the year 2023," we'd call them delusional. When someone does the same thing by projecting 10-year market returns, we call them analysts.
Someone who bought a low-cost S&P 500 index fund in 2003 earned a 97% return by the end of 2012. That's great! And they didn't need to know a thing about portfolio management, technical analysis, or suffer through a single segment of "The Lighting Round."
Meanwhile, the average equity market neutral fancy-pants hedge fund lost 4.7% of its value over the same period, according to data from Dow Jones Credit Suisse Hedge Fund Indices. The average long-short equity hedge fund produced a 96% total return -- still short of an index fund.
Investing is not like a computer: Simple and basic can be more powerful than complex and cutting-edge. And it's not like golf: The spectators have a pretty good chance of humbling the pros.
Most investors understand that stocks produce superior long-term returns, but at the cost of higher volatility. Yet every time -- every single time -- there's even a hint of volatility, the same cry is heard from the investing public: "What is going on?!"
Nine times out of ten, the correct answer is the same: Nothing is going on. This is just what stocks do.
Since 1900 the S&P 500 (^GSPC) has returned about 6% per year, but the average difference between any year's highest close and lowest close is 23%. Remember this the next time someone tries to explain why the market is up or down by a few percentage points. They are basically trying to explain why summer came after spring.
Someone once asked J.P. Morgan what the market will do. "It will fluctuate," he allegedly said. Truer words have never been spoken.
You need no experience, credentials, or even common sense to be a financial pundit. Sadly, the louder and more bombastic a pundit is, the more attention he'll receive, even though it makes him more likely to be wrong.
This is perhaps the most important theory in finance. Until it is understood you stand a high chance of being bamboozled and misled at every corner.