Stocks plummeted Friday after the U.S. Labor Department issued a dismal monthly employment report, suggesting that economic growth is losing momentum. The economy added only 88,000 jobs in March. By the end of the day, the Dow lost 0.1 percent for the week, the S&P 500 dipped 1 percent and NASDAQ dropped 2 percent.
Geopolitical tensions also influenced the market, with North Korea making aggressive noise. Such skirmishes may be overblown, but they could sway investors into waiting before diving back into the market.
There are no signs that the market is about to crash. In fact, the volatility creates opportunities to invest in more stocks at lower prices.
As an investment, stocks have always been good as a hedge against inflation. If inflation picks up, it could destroy the value of bonds and cash. Even if stock returns trend downward, they may still be higher than returns from bonds and cash.
After the all-time highs reached over the past few weeks, little indicates that the market will crash. It could head lower, but that’s only to be expected when you invest in the stock market. While many equity investments hold a temporary risk, they can also create an opportunity.
Town Crier “50” stocks in the news:
• Hewlett-Packard Co. (HPQ; $21.83) scored its share of headlines last week. The most damaging was a report from Goldman Sachs that downgraded the company’s stock rating to sell, with a target price of $16.
To further pile on, after voting on the annual report last week, three of HP’s 11 board members, including Chairman Ray Lane, resigned. The shakeup – the second in two years – may make it easier for CEO Meg Whitman to continue enacting changes.
HP’s stock is up 56 percent year-to-date, and the company is looking to develop a service business like IBM’s, with consulting operations designed to increase revenue and profit.
The Palo Alto-based company performed well in the first quarter, generating $2.6 billion in cash flow, but the forward price-earnings ratio of 6.3 percent is well below the median of 9.4 percent for the technology sector. HP provides a good dividend with a yield of 2.2 percent.
• Cisco Systems Inc. (CSCO; $20.53) increased its quarterly dividend last week, raising it from 14 cents to 17 cents per share for a $639.8 million payout to shareholders. Cisco’s stock now boasts a yield of 3.3 percent, placing it in territory with Intel at 4.1 percent and Microsoft at 3.2 percent. Cisco has a market cap of $113.02 billion, and shares are up 7.1 percent year-to-date.
Cisco offers a line of products for transporting data, voice and video within buildings, across campuses and around the world. The company claims that its products are designed to transform “how people connect, communicate and collaborate.” However, Cisco investors should be on guard against the rise of cloud computing, the popularity of which could negatively impact many of the company’s products.
Numerous analysts rate Cisco stock a buy.