Dow Tumbles With Costco but Visa and MasterCard Soar

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Stocks pulled back today as investors reacted to yesterday's apparent congressional budget deal as the Dow Jones Industrial Average fell 130 points, or 0.8%, while the S&P 500 dropped 1.1%.

Visa led the Dow winners, gaining 3.1%, as it jumped on good news from rival MasterCard , whose shares jumped 3.5% after announcing a 10-for-1 stock split and a $3.5 billion repurchase plan. With a market cap of $95 billion, the $3.5 billion repurchase program should lift earnings per share over the long run by about 3.5% so today's jump may be a little exaggerated. Stock splits, while often generating attention and enthusiasm, should have no effect on a stock movement. The credit card company also said it would hike its quarterly dividend to raise its yield from 0.3% to 0.55%. Both companies have relatively low dividend yield, but rake in gobs of free cash flow. Many market observers expect the capital being returned to shareholders to increase.


Warehouse retailer Costco finished down 1.2% after it missed on top and bottom lines. While retailers across the board have struggled this quarter, Costco as a low-price competitor with a membership model seemed immune from the industry's woes but that was not the case. Earnings per share came in at $0.96 against estimates of $1.02 as expenses grew faster than revenue. Expenses for employee stock option grew 24% due to a large gain in the company's stock price this year, and sales moved up 5% to $24.47 billion, short of estimates of $25.35 billion. Same-store sales were up 3%, or 5% excluding changes in fuel prices and currency translation, indicating the core business remains strong.

Make money money
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

The article Dow Tumbles With Costco but Visa and MasterCard Soar originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Costco Wholesale, MasterCard, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum