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The Dow Jones Industrial Average eked out a 15-point gain on Wednesday to close at yet another record high of 18,224.57. Meanwhile, the Nasdaq and S&P 500 retreated. Yesterday's choppy trading session was defined by Federal Reserve Chair Janet Yellen's lack of clarity over the central bank's plans to raise interest rates and mixed home sales data. Consumer discretionary stocks limited downside on the S&P 500 with McDonald's Corp.'s (NYSE: MCD) 3.9% gain leading the way.
What to Watch Today: This morning, investors will turn an eye to domestic data. News broke this morning that 313,000 Americans filed for unemployment benefits last week. The data was higher than consensus expectations of 290,000 filings. In addition, investors will watch for January readings on the Consumer Price Index and Durable Goods Orders.
Here's what else you should know about the stock market today – including your "Money Morning Tip of the Day" – to make it a profitable Thursday:
- Calm Before the Storm: The housing market also received some positive news on Wednesday. Delinquency rates of mortgage holders sat at 5.7% at the end of Q4 2014. This is the lowest rate that the U.S. economy has seen since 2007, according to the Mortgage Bankers Association. But Americans should remain on guard about the resurgence of subprime loans across the nation. That's why our Shah Gilani has a warning for anyone who thinks that this time is different… The truth is here, and it's more disturbing than you think.
- Earnings Week: Shares of Salesforce.com Inc. (NYSE: CRM) surged more than 9% yesterday on news the company raised its 2016 revenue outlook to $6.48 billion to $6.52 billion. The cloud-based business software company also reported adjusted fourth-quarter per-share earnings of $0.14, lining up with estimates of Wall Street analysts. During the company's earnings call, CEO Marc Benioff said the firm hit $5 billion in annual revenue faster than any enterprise software firm.
- Banks Behaving Badly: Shares of investment bank Morgan Stanley (NYSE: MS) were flat this morning on news that it will pay a $2.6 billion settlement to resolve claims concerning its sale of mortgage-backed securities. This is a much smaller settlement than the ones faced by rivals Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM), signaling the government concluded Morgan Stanley had a smaller role in the housing bubble of 2008. In 2013, JPMorgan Chase settled a case for $13 billion, while Bank of America paid $16.7 billion last year.
- Oil Prices Today: Crude oil prices surged again today, continuing a volatile two-month period for the energy sector. Despite rising inventory levels in the United States, oil prices swung into the black on news that Saudi Arabia's finance minister said global demand is growing. Oil prices turned positive this morning. April 2015 futures for WTI crude jumped 1% to $51.65 per barrel. Meanwhile, Brent crude added another 1% to hit $60.82 per barrel.
- Bad Press: On Wednesday, shares of Lumber Liquidators (NYSE: LL) slumped as much as 26% after the company reported a huge earnings miss and projected negative press for the firm in the near future. LL management warned investors that it believes 60 Minutes is conducting an investigation into the firm, and that a pending broadcast may put the firm in a bad light. The company also said that the Department of Justice is considering criminal charges against the firm under the Lacey Act, a domestic conservation law that bars the trading or possession of illegally possessed or transported plants or wildlife.
- Earnings Reports: Today, expect earnings results from 3D Systems Corp. (NYSE: DDD), Clean Energy Fuels Corp. (Nadsaq: CLNE), JC Penney Co. Inc. (NYSE: JCP), Kohl's Corp. (NYSE: KSS), Nelnet Inc. (NYSE: NNI), Northern Oil and Gas Inc. (NYSE: NOG), Ross Stores Inc. (Nasdaq: ROST), Sears Holdings Corp. (Nasdaq: SHLD), and Western Refining Inc. (NYSE: WNR).
Full U.S. Economic Calendar February 26, 2015
- Consumer Price Index at 8:30 a.m.
- Durable Goods Orders at 8:30 a.m.
- Jobless Claims at 8:30 a.m.
- FHFA House Price Index at 9 a.m.
- Bloomberg Consumer Comfort Index at 9:45 a.m.
- EIA Natural Gas Report at 10:30 a.m.
- Kansas City Fed Manufacturing Index at 11 a.m.
- 3-Month Bill Announcement at 11 a.m.
- 6-Month Bill Announcement at 11 a.m.
- 52-Week Bill Announcement at 11 a.m.
- Atlanta Federal Reserve Bank President Dennis Lockhart Speaks at 12:40 p.m.
- 7-Year Note Auction at 1 p.m.
- Fed Balance Sheet at 4:30 p.m.
- Money Supply at 4:30 p.m.
Money Morning Tip of the Day: Turn market volatility to your advantage and earn more money on your investments by using a buying strategy called split entries.
Today's tip comes from Money Morning Tech Expert Michael A. Robinson:
The stock market has been volatile over the last several months. And we'll be dealing with this choppiness for the foreseeable future.
But you can turn choppy markets into huge profits by using a tool called "split entries."
Here's how it works. Instead of buying your standard amount of a stock, you divide your entries into at least two tranches.
For example, say you want to invest in a company called Ultimate Tech Inc. at $50 a share. Start by investing half of your standard stock purchase at the current market price. In this case, 100 shares would cost you $5,000, but you cut that in half, starting with $2,500.
As soon as that market order fills, you put in what's known as a "lowball limit order." That's an order to purchase shares when they fall to a specified price.
I usually set mine at a 20% discount from my original entry price, but use your best judgment in each individual case.
In this case, you'd buy a second round of Ultimate Tech at $40 a share. When the stock falls to that price, your order automatically fills and you now have an average cost of $45, a 10% discount from your original order.
Now let's say Ultimate rallies all the way to $60. Based on your average price of $45, you have cumulative gains of 25%. Your original order has gains of 16.6%.
But your second half has earned twice as much – 33.3%.
This is a great way to bake extra profits into your portfolio when markets are volatile.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.