Market Wrap-Up for May 31 (JOY, CAT, KSS, JWN, WMT, CLF, more)

This morning’s weak GDP report and uptrending jobless claims report had some traders heading for the exits in today’s early action, ahead of tomorrow morning’s monthly unemployment report. By mid-afternoon however, prices began to stabilize as investors saw some better entry points in names that have come down in recent weeks. Whether it was short-covering or real buying, it is always a good sign to see calmer heads prevail.

Earnings are not much of a factor this week for the stock tape. Commodity equipment play Joy Global (JOY) was down on this morning’s earnings release, however. The weakness also hurt shares of competitor Caterpillar (CAT).

Monthly retail sales numbers were out this morning for several major brands. Leading the way lower for the retail sector on the news were shares of Kohl’s (KSS), Nordstrom Inc. (JWN), and the Buckle (BKE). On the flipside, shares of TJX Companies (TJX), Ross Stores (ROST), and Wal-Mart Stores (WMT) all rallied on their sales update. Finally, Wall Street analyst downgrades put a damper on shares of Cliffs Natural Resources (CLF) and transports play C.H. Robinson Worldwide (CHRW).

New Watchlist Article Out Today

Be sure to check out our weekly Top 50 High-Yield Watchlist Names post that is out today, exclusively for Premium members. This list gives readers a good idea of what stocks we’re watching behind the scenes here for potential upgrades.

Benefit Cuts/Bad Inflation Trending Higher

A survey by the National Endowment for Financial Education finds 40% of working adults have seen their employer-sponsored benefits reduced or eliminated entirely over the past 5 years. Health care costs were hit the hardest in the study. With employers cutting back, employees shouldered more costs, including higher deductibles and co-pays, as well as more expensive premiums.

The “bad” inflation is all around us. Go to the supermarket and you will see how much smaller the food packages have gotten. Just the other day, I saw potato gnocchi pasta on sale, 2 packages for $5 (that’s $1 more than the sale prices I used to pay), but here was the catch, the size of the bag was 10 ounces — they used to be 16 ounces! I’m sure everyone out there has noticed similar price inflation for some of their favorite food items as well. And of course, we’re still paying through the nose at the gas pump.

The Right Investor Mindset for the Current Environment

We realize that recent selling in the market has some investors nervous, but when you look at the bulk of the selling, much of it’s been in the higher-beta stocks. High-beta names usually offer very low dividend yields (or none at all), which means very little downside protection. These stocks just don’t have the loyal shareholder bases that our Best Dividend Stocks do, so selling just begets more selling from short-term traders.

Of course, the business media paints any sell-off as a bad thing for all stocks involved. In contrast, we like to view pullbacks as opportunities to get into high-quality dividend names at better price points. Inevitably, some great dividend stocks will be dragged down a bit during market pullbacks.

If you bought quality companies during the massive sell-off of 2008/2009, the phenomenal returns since then should have solidified your resolve to consistently put money into the best dividend stocks. If you tend to get rattled during pullbacks, however, I suggest you avoid business television during down days. In the endless chase for ratings, the mainstream business media will always resort to fear mongering during these periods.

As always, we’ll continue to look for new opportunities during pullbacks, all the while keeping an eye on our current recommendations. If and when we see downside for particular names we currently like, we’ll let subscribers know immediately. Just remember, 9 out of 10 times our downgrades are not “Sell” calls — they simply mean “no new money” into the stock (“Hold”).

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Thanks for reading everybody. I’ll see you tomorrow!

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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