Market Wrap-Up for May 30 (COST, JOY, EMC, more)

The markets were able to regain some ground today after yesterday’s slight pullback. Despite continued volatility in the Japanese markets, concerns about the end of quantitative easing (QE), disappointing economic data, and rising interest rates, the indices made a push early in today’s session. Though stocks eventually fell from the intraday highs later in the day, they still closed in the green once again.

Among today’s upward movers were Sanderson Farms (SAFM) and Joy Global (JOY), after both reported better than expected earnings. Also closing higher today was data storage company EMC Corp (EMC), after it said it was initiating a dividend payout and increasing its share buybacks.

Costco (COST) was among the early movers to start off today’s session, after the company reported its third quarter earnings. However, the shares eventually gave up their early gains and closed in the red.

Some Wall Street analysts’ upgrades of Northrop Grumman (NOC), L-3 Communications (LLL), and Aetna (AET) help those shares close higher today. On the flip side, downgrades of Halliburton (HAL), Baker Hughes (BHI), and Mondelez (MDLZ) caused those shares to head into negative territory.

Forget the Noise

The reaction following today’s worse-than-expected GDP and initial jobless claims got me thinking: long-term investors need to take economic indicators like these with a grain of salt. While the initial release of these data points is good for traders, as they help short term movement of stocks, it just creates a lot of confusing noise for long-term investors and their decision making process. GDP and unemployment numbers like the data released today get revised continuously, month after month, quarter after quarter. The initial data could be misleading, negatively impacting a possible investing decision. So in short, investors with a long-term focus should be wary of putting too much faith in the headline numbers.

More on Rising Interest Rates

As we discussed yesterday, there is a lot of attention focused on the rise of interest rates. For dividend investors, the impact of rising rates is already starting to be seen in the stock market. Yesterday, a number of defensive, dividend favorites like Colgate-Palmolive (PL), Clorox (CLX), Procter & Gamble (PG), and especially Kimberly Clark (KMB) took big share price hits with a significant amount of volume. It may be a sign that big, institutional investors may be rotating out of dividend plays to take advantage of the rising interest rates in other markets.

For those with old positions in these dividend favorites, this kind of short term movement is not that concerning. However, for the slew of investors sitting on the sidelines, waiting to find attractive entry points, this apparent rotation may be a signal that better buying opportunities are ahead. It may be wise to let the possible rotation work its way through the markets.

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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