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The DJIA Index fell 85 points Tuesday, retreating from record territory. The cause? Lower than expected auto sales and mixed retail earnings reports.
The Nasdaq dipped back below the 5,000 level, giving up most of Monday's gains. The tech-heavy index was pulled down by Microsoft Corp. (Nasdaq: MSFT) and Cisco Systems Inc. (Nasdaq: CSCO), which fell 1.3% and 2.15% on the day, respectively.
Dow: 18,203.37, -85.26, -0.47%
S&P 500: 2,107.78, -9.61, -0.45%
Nasdaq: 4,979.90, -28.20, -0.56%
The S&P 500 Volatility Index (VIX), the market's fear gauge, jumped 6.29% on the day.
What Moved the Markets Today: Shares of Ford Motor Co. (NYSE: F) dipped on news that its February sales fell by 2%, a steep drop from analyst expectations. Despite the news, the firm increased investor interest after announcing plans to introduce an electric vehicle with a range of 321 miles.
The markets also kept an eye on Washington D.C. During a televised speech before a joint session of Congress, Israeli Prime Minister Benjamin Netanyahu warned the United States against accepting a nuclear deal with Iran. The prime minster said doing so would begin a "countdown to a potential nuclear nightmare." Concerns over Iran and Libya fueled an increase in oil prices this afternoon.
Now, check out the other top market stories – plus get our new profit tip for investors:
- Alibaba Bust: Shares of Alibaba Group Holding Ltd. (NYSE: BABA) slumped nearly 3% and hit a historical low. The news comes after the Taiwanese government asked the company to withdraw from its borders over concerns of its Chinese ownership. The company is also reeling from reports of fraudulent orders of knock-off products. Shares of Alibaba stock are now trading at roughly $81.58 per share.
- Merger Mania: Private equity firm Arlington Capital Partners hired two investment banks to explore an auction of software and services giant Novetta Solutions. Including debt, a potential private equity sale of the government services firm could top $650 million. Prospective buyers include defense contractors General Dynamics (NYSE: GD), Lockheed Martin Corp. (NYSE: LMT), and Raytheon Co. (NYSE: RTN) or tech giants Hewlett-Packard Co. (NYSE: HPQ) and International Business Machines Corp. (NYSE: IBM).
- Retail Romp: Shares of Best Buy Co. Inc. (NYSE: BBY) gained more than 1.4% today after the big-box retailer beat quarterly earnings The firm reported earnings of $1.48 per share, besting consensus expectations of $1.36. The firm said consumers purchased more big-screen televisions, mobile phones, and other electronic devices than analysts anticipated. Best Buy also announced plans to hike its dividend by 21% and introduce a $1 billion buyback program over the next three years.
- Buyback Boom: Best Buy wasn't the only retail giant to announce a stock buyback today. Target Corp. (NYSE: TGT) CFO John Mulligan announced the company's stock buyback program is expected to resume very soon. The firm has committed roughly $2 billion to investors this year. According to the company's quarterly phone call with analysts today, the stock plans to boost the program to $3 billion in 2016. Shares of Target pared losses in the afternoon after Mulligan's presentation.
- An Apple a Day: Shares of Apple Inc. (Nasdaq: AAPL) were in the black this afternoon as more reports emerge about the firm's pending release of an Apple virtual reality A patent that surfaced last month describes a piece of virtual reality headgear, and it's just the latest news of innovation at the tech giant that includes the Apple electric car. So what does it mean for AAPL stock? Our Chief Investment Strategist Keith Fitz-Gerald joined FOX Business' Neil Cavuto to discuss what it means for Apple investors in the future. Watch the interview here.
Money Morning Tip of the Day: Don't shy away from stocks pushing 52-week highs based on price alone. Instead, use the following metrics to determine if a stock is still a good buy.
Today's tip comes from Money Morning Chief Investment Strategist Keith Fitz-Gerald:
With hundreds of companies at fresh 52-week highs, many investors question the wisdom of putting more money to work. The fear is that a stock tapping new higher prices could be ready for a fall.
But a stock that's near its yearly high can still be a good investment with room to run. Here's what to look for:
- Price/earnings ratio. The P/E ratio is calculated by taking a company's price per share (P) and dividing it by earnings per share (E). The higher the P/E, the more the market is willing to pay for each dollar of annual earnings.
- Forward P/E ratio. This uses forecasted earnings to calculate the relative price appeal of a stock price. If earnings are expected to grow in the future, the forward P/E will be lower than the current P/E – which spells profitable days ahead for a company.
- Price/earnings to growth (PEG) ratio. PEG is calculated by taking a stock's P/E ratio and dividing by its expected percentage earnings growth rate – typically for the next five years. In general, the lower the PEG, the better the value. Companies with PEG ratios of 1 or less are usually bargains.
Let's look at Apple Inc. (Nasdaq: AAPL). The stock has gained 8.77% since early February. Its total market cap is now $745 billion. Is AAPL a good deal at these prices?
Apple's P/E ratio of about 17 today is barely half that of the industry average. When accounting for forecasts up through the 2016 fiscal year, forward P/E is a respectable 14.07. The PEG ratio is 1.17.
So AAPL could still be very much a "Buy" despite its recent surge in price.
Keith Fitz-Gerald is a seasoned market analyst and professional trader with more than 30 years of experience. For more investing tips and stock picks from Fitz-Gerald, go here…