Following a three day winning streak, stocks started to pull back today on some disappointing economic data and losses in Europe. However, the indices eventually bounced off their early lows and made an attempt to reach positive territory. But, the Dow and S&P ultimately closed in negative territory to end the final trading session of a wild second quarter.
Futures initially pointed to a positive open early this morning following the three day winning streak and a rally in Asian markets. However, a European market sell-off, disappointing Chicago PMI data, a decline in the University of Michigan consumer confidence survey, and ongoing Fedspeak from Federal Reserve governors and presidents eventually spooked investors, who caused the indices to settle in the red early in the session. It seemed like stocks were making an effort to make it a four day winning streak throughout the day, but a late sell-off caused stocks to close in the red.
Disappointing earnings and a reduced forward guidance from Accenture (ACN) pulled those shares down more than 10% for the day. Nike’s (NKE) earnings release and subsequent comments in its conference call disappointed investors early, but the stock was able to overcome the early downward pressure to rise more than 2.5% by the close. Furthermore, better-than-expected earnings from Finish Line (FINL) and Shaw Communications (SJR) helped push those stocks higher in today’s trading.
Analyst upgrades of GameStop (GME) and Vodafone (VOD) caused those stocks to head into positive territory today. Downgrades of Covidien (COV) and T. Rowe Price (TROW) dragged those shares into negative territory.
Be sure to check the Dividend Daily for all the latest earnings reports, analyst moves, and much more.Starving for Innovation
The market is starving for companies that actually have a commitment to innovation. In today’s economy, companies seem more committed to utilizing excess profits to boost share prices by buying back shares, not growing their business organically or producing new products. As a result, these companies have been choking off the economy by not hiring new workers, or worse laying employees off, all in the name of bigger margins and earnings per share.
In the short-term, these share buybacks and other financial maneuvers are appealing to investors as they help with share price appreciation. But how sustainable is this sort of model if a majority of the companies are taking this path? If companies do not innovate and try to grow, revenues will be hard to come by, putting an increased pressure on earnings and share price.
Having said that, investors continue to show their desire to see a company that is actually putting its resources to work through research and development to innovate new products that serve the economy. Tesla (TSLA), whose stocks is up over 200% year-to-date, is a perfect example of investors rewarding a company that innovates. Though some may argue Tesla’s electric cars may be a flash in the pan, it’s ambitions are being met with enthusiasm from investors.
All in all, there will have to be a point where corporations begin to take their profits and put them to work through innovation in new products and services. If not, investors and the economy will feel the pain.Looking Toward Next Week
Earnings releases are few and far between next week, especially for bigger name companies. Nonetheless, investors should remember that on Thursday of next week the markets will be closed for the Fourth of July holiday.
Thanks for reading and have a great weekend!
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