News with Tags "US Stock Market"

Yesterday's afternoon rally was apparently short-lived. The Dow Jones Industrial Average (INDEX: ^DJI  ) tumbled 158 points, or 1.2%, today as the market appeared to face the music that is the fiscal cliff. President Obama met with top legislators, but would not offer Republicans a new plan. Revelations of the impasse sent the Dow diving late in the session.

With the House set to reconvene on Sunday, investors will hope for some sort of Hail Mary pass to avert the fiscal cliff by year's end on Monday. Without a bill, income taxes will go up for all Americans starting Jan. 1 and spending cuts will kick in on government programs. The CBOE Volatility Index (INDEX: ^VIX  ) , Wall Street's volatility measure, or "fear factor," jumped 17% to $22.72 today, indicating a nervous market.

Elsewhere, macroeconomic reports continued to portend an improving economy as the Chicago Purchasing Managers Index and November pending home sales topped expectations.

Every Dow component fell today, with Hewlett-Packard (NYSE: HPQ  ) leading the way with a 2.6% drop. The Justice Department announced it would be investigating the company's Autonomy unit, which forced HP to take a $8.8 billion writedown following its acquisition of the software maker. HP had accused the target company of fraud among other violations, and shares of the PC maker have been particularly volatile since news broke of the write-off.

Oil stocks also took a hit as ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) fell 2% and 1.9%, respectively. Though oil futures only fell slightly, the oil majors seemed to be affected by EPA chief Lisa Jackson's decision to step down in January. While Jackson has been tough on the oil industry by negotiating higher fuel standards for car makers, a new chief could be tougher, and the market hates uncertainty. Stricter regulations on fracking could also have an impact on such companies as Exxon, which is the country's no. 1 natural gas producer.

Monday should be a big trading day as political heads will hustle to get a deal done, and investors have one final day to sell before they face what could be a higher capital gains rate in 2013.

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In this video, author Jack Schwager tells us how, when choosing a fund to invest in, that fund manager's past returns are no guarantee of future success. Many people turn to mutual funds and index funds to invest for their future. Making the right financial decisions today makes a world of difference in your golden years, but with most people chronically undersaving for retirement, it's clear not enough is being done. Don't make the same mistakes as the masses. Learn about The Shocking Can't-Miss Truth About Your Retirement. It won't cost you a thing, but don't wait, because your free report won't be available forever.

Brendan Byrnes: Let's talk about how you evaluate fund managers, maybe looking at a mutual fund or another fund. Do past returns have any relevance there at all?

Jack Schwager: Past returns are potentially very, very misleading. As I said before, you have to separate the market effect -- how much of it is the market -- from the manager.

You can look at how a manager does, given what a strategy is. Yes, you look at returns, but you have to be in the context of what the underlying market did, and in the context -- this is very important -- of the amount of risk undertaken to get that return.

This is another mistake I point out: People pay too much attention to return. "Oh, this guy made 40%. He's a great manager." Well, you know what? You take a 20% manager; you know how to turn him into a 40% manager? Just double all his positions.

Anybody can double their returns by taking twice as much risk. If you look only on the return side, you miss a critical element, which is how much risk was taken to get that return. I personally -- and I allocate, because one of the things I do is I'm a portfolio manager for a fund -- and I never look at returns by themselves.

I never look at it. It means nothing. I will only look at return in context of the amount of risk taken.

Rapidly swinging up, down, then back up again like a demanding toddler at a playground, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) swung wildly throughout the day, and closed 18 points lower, or 0.14%, to end the day at 13,096. Despite some optimistic economic data in the morning on things like unemployment and home sales, the markets fell into a rut, as no positive news came on the fiscal cliff resolution. At one point this afternoon, every single Dow stock had lost ground. 

Thankfully, in the last hour and a half, stocks staged a comeback. International Business Machines (NYSE: IBM  ) was one of six Dow stocks to end in positive territory, after the House of Representatives announced a Dec. 30 session to work on the impending fiscal cliff.

Another technological blue chip mainstay, Cisco Systems (NASDAQ: CSCO  ) , wasn't quite as lucky, and actually led the index's laggards on Thursday, falling 1.4%. Cisco investors have seen a slew of acquisitions this year, and perhaps last week's pickup of telecom service-management provider BroadHop was one too many. Last month alone, Cisco spent nearly $1.5 billion to buy three different cloud-based companies. If Cisco's hoping these acquisitions will take investors to Cloud Nine, thus far, it's been sorely mistaken. 

It almost goes without saying that another day closer to the fiscal cliff is another bad day for industrials. So, as the markets began to pick up a bit in the afternoon, aluminum manufacturer Alcoa (NYSE: AA  ) didn't join the rally; a last-minute meeting scheduled just days before the Jan. 1 deadline apparently wasn't enough to boost the stock, and shares fell 1.3%.

Outside of the Dow, there was at least one unusual winner. Herbalife (NYSE: HLF  ) , which sells weight management and nutritional supplement products, finally had a decent day, gaining 3.2%. Nevermind that the company is down more than 40% for the year, or that legendary hedge fund managers have called the business model a "pyramid scheme." The company will hold a meeting in mid-January to address these issues, so there's no need to fear. Phew! 

Once a high-flying tech darling, Cisco is now on the radar of value-oriented dividend lovers. Get the lowdown on the routing juggernaut in The Motley Fool's premium report. Our report also has you covered with a full year of free analyst updates to keep you informed as its story changes, so click here now to read more.

As December comes to a close, 2013 is just around the corner, and it's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.

Today, I'll look at Caterpillar (NYSE: CAT  ) . Caterpillar has been a member of the Dow Jones Industrials (DJINDICES: ^DJI  ) since 1991, but it's largely been stuck in neutral during 2012 as it tries to navigate a choppy economic environment both in the U.S. and abroad. With the fiscal cliff still looming, can Caterpillar make solid advances next year? Below, you'll see more about Caterpillar's prospects for 2013.

Stats on Caterpillar

Source: Yahoo Finance.

Will Caterpillar keep building in 2013?
Analysts are forecasting modest gains for Caterpillar in 2013, with the current price target translating to an advance of more than 10% for the stock. But as sales and earnings estimates show, the gains will have to come from multiple expansions, as the company seems pessimistic about its ability to keep growing fundamentally.

Caterpillar's recent struggles stem from the slowdown in global economic growth. Even powerhouses like China, which seemed immune to slowdowns in Europe and the U.S., have started to see slowing growth, and that's part of what weighed down Caterpillar shares in 2012. In particular, a slowdown in mining led Rio Tinto (NYSE: RIO  ) and other mining companies to slow down their production, leaving Caterpillar and rival Joy Global (NYSE: JOY  ) to retrench after expanding capacity there in recent years. But with China spending more than $150 billion to bolster the nation's infrastructure, Caterpillar should get more than its fair share of that money to boost its business.

More broadly, improving economic conditions could bring a new bull run for Caterpillar. But the company will see more competition from General Electric (NYSE: GE  ) in 2013 as it starts to move forward with its foray into the mining-equipment business. With Caterpillar having gotten used to dominating its domestic competition, GE's entry will change the dynamics of the entire industry.

Unlike many short-term-focused players, Caterpillar has already given investors guidance as far out as 2015. Throughout the coming year, be sure to gauge how the company does compared to that somewhat cautionary guidance and look for signs of improvement that could point to better profit opportunities down the road.

Learn more
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Yesterday, I shared with you a few tidbits of research on what it might really cost to run Santa's workshop in the North Pole. The limitations of the infographic format kept me from offering more detail on this idea, but there's no time like the present to dive right into the economics behind this commercial icon of Christmas. You've seen it in pictures, so now let's drill down into the numbers. This is Santa Corp. uncovered.