Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.
Today’s U.S. economic data certainly didn’t seem to align with the up move in the broad-based S&P 500 ((INDEXSP:.INX) — but today was anything but normal.
The big report that all investors had their eye on was weekly initial jobless claims, which rose 13,000 from the prior week to an annually adjusted level of 336,000. Although we would prefer to never see this figure go up, 336,000 is still historically low over the past six years and would certainly lead to the potential for the unemployment rate to fall further. Nonetheless, today’s big move higher in the S&P 500 ((INDEXSP:.INX) is a bit odd given this news.
What we can really chalk up under the “odd” file is the Nasdaq Composite‘s trading, which was halted for some three hours today after software related to quote dissemination at the composite failed to work properly. This might mark the first time I can ever recall there being an index halt over which investors didn’t panic and send the markets lower. As I said, it was a really odd day.
When all was said and done, the S&P 500 ((INDEXSP:.INX) had climbed by 14.16 points (0.86%) to close at 1,656.96. This was the S&P 500’s biggest gain over the past three weeks.
Topping the charts today was video game and accessories retailer GameStop Corp. (NYSE:GME), which gained 9% after reporting market-topping second-quarter earnings results before the opening bell. For the quarter, GameStop Corp. (NYSE:GME)’s revenue fell 11% to $1.38 billion as it delivered EPS of $0.09. Both figures handily topped the $0.05 in EPS and $1.36 billion in sales the Street had expected. The big boost came from a shift to mobile gaming, where revenue rose 121%, and from the anticipated release of two new gaming consoles — the Xbox One and PlayStation 4. On the heels of this gaming excitement, GameStop Corp. (NYSE:GME) boosted its full-year EPS to a range of $3 to $3.20 from its prior forecast of $2.90 to $3.15 and now anticipates same-store sales growth will come in between a decline of 3.5% and growth of 1.5%, as compared with previous guidance for a decline of up to as much as 5%. While great news for current shareholders, I still see this as a textbook case of “buy the rumor, sell the news.” I’m concerned at its current valuation that investors’ excitement will quickly fade once these gaming consoles are out and would suggest current investors consider that possibility.