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The Dow Jones industrial average and other stocks edged lowerduring the latest week, digesting recent gains as oiltumbled. Health care stocks were in motion as President Trump and the GOP Congress pushed major health care changes. A strong jobs report locks in next week's Federal Reserve rate hike. Snap (SNAP) retreated in its first full week.
Stocks Are Low Energy
The Dow Jones industrial average, S&P 500 index and Nasdaq composite fell modestly for the week, as plunging oil prices weighed on energy stocks, including Dow components Exxon Mobil (XOM) and Chevron (CVX). Investors didn't appear fazed by a likely Federal Reserve rate hike in the coming week. Treasury yields closed in on recent peaks, but homebuilders were among the stronger groups. Fiber optic stocks sold off on weak earningsfrom Ciena (CIEN) and Finisar (FNSR). Ulta Beauty (ULTA) hit a new high on blowout same-store sales and e-commerce gains.Snapchat parent Snap fell back while Facebook (FB) hit a new high and China's Momo (MOMO) soared on earnings. did well.
Oil Plunges Below $50 As U.S. Shale Booms, Saudis Buckle
U.S. oil futures tumbled 9.1% for the week to $48.49 a barrelas a U.S. shale revival is offsetting OPEC-led production cuts. U.S. crude stockpiles surged by 8.2 million barrels to an all-time high while U.S. production continued to ramp up and the number of rigs in operation continued to climb Saudi Arabia reportedly warned top U.S. shale producers at IHS' CERAWeek not to automatically expect an extension of the OPEC output deal. Saudi and other OPEC officials had been trying to convince markets that they will hold firm on cuts, but that's only encouraged U.S. shale producers to race in to fill the gap.
Royal Dutch Shell (RDSA) CEO Ben van Beurden said oil demand could peak as early as next decade but Chevron (CVX) CEO John Watson said that peak demand is "wishful thinking." BP (BP) CEO Bob Dudley said Russia is "very misunderstood" and is a good business investment. Shell agreed to sell the majority of its Canadian oil sands assets and Exxon Mobil (XOM) bought natural gas assets off the shore of Mozambique. BP and Russia also announced natural gas expansion hopes during the conference.
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Job Growth Strong, But Not Too Strong
The U.S. economy added 235,000 jobs in President Trump's first full month in office, while the unemployment rate dipped to 4.7%. Meanwhile, average hourly earnings rose 2.8% from a year ago, just a tad behind the fastest growth of the recovery. The Federal Reserve had already telegraphed a near-certain rate hike on March 15 before Friday's report confirmed the second straight month of stellar job gains.Job gains were lifted by warm weather, which fueled a 58,000 rise in construction employment. Yet enthusiasm about the Trump agenda of deregulation, tax cuts and infrastructure spending has clearly been a factor behind the spurt in job growth and economic confidence. The IBD/TIPP Economic Optimism Index, though dipping slightly to 55.3 in March, remained close to February's 12-year high.
The key question is whether the optimism — and strong job growth — is sustained throughout the spring, in which case the Fed's rate-hiking timetable will accelerate.
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GOP, Trump Moves Swing Hospitals, Drug Stocks
House Republicans rolled out legislation to repeal and replace much of ObamaCare, with the legislation clearing some hurdles despite opposition from various liberals, conservatives and moderates. Hospital operator, Tenet Healthcare (THC) sold off during the week amid concerns of losing paying customers. RivalsHCA Holdings (HCA) and Universal Health Services (UHS) also retreated. Insurers were mixed, with Anthem (ANTM) closing in on a 20-month peak. But Molina Healthcare (MOH) fell sharply. Meanwhile President Trump tweeted out that he's working on drug pricing, sending some drug and biotech stocks lower.
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SnapFalls As More Analysts Say Sell
Shares of Snapchat-operator Snap (SNAP) reversed sharply following its initial public offering on March 2, when the stock jumped 44% from its IPO price of 17 on the first day of trading. The stock hit a record high of 29.44 the next day, a Friday. This past week, as Snap was showered with sell ratings, hit a low of 20.64, and then rebounded. Snap fell 18.5% for the week to 22.07.Facebook (FB), which continued to roll out features that ape popular Snapchat offerings, hit a record high.
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China's Momo Skyrockets On Live-Video Boom
China mobile app Momo (MOMO) hit a record high after reporting fourth-quarter earnings that beat estimates, as did its first-quarteroutlook. Momo reported a 633% jump in Q4 earnings, while revenue rocketed 524% to $246 million. The Chinese internet play has thrived since introducing a paid video-sharing service to its users last year. Momo shares soared in a volatile week.
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Ulta Beauty Guides Low, e.l.f. Rebounds
Ulta Beauty (ULTA) reported its second-straight quarter of accelerating EPS and sales growth, as e-commerce revenue soared 63%. The beauty products retailer guided low for the current quarter. Ulta shares initially fell Friday, but rebounded to close up nearly 5% in strong volume to a record high as investors downplayed Ulta's outlook as typically conservative. Meanwhile, value cosmetics maker e.l.f. Beauty (ELF) reported better-than-expected holiday results and gave bullish guidance. Its stock soared 12% on Thursday, paring gains somewhat on Friday.
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Homebuilders Lead Amid Strong LGI Homes Earnings
LGI Homes (LGIH) earned $1.01 a share, up 35% vs. a year earlier, while revenue climbed 34% to $234.6 million. Wall Street had expected EPS of 94 cents on sales of $235.9 million. The builder sees 2017 EPS of $4-$4.50, well above analyst targets of $3.74. LGI Homes shot up nearly 13% to a five-month high Tuesday. Meanwhile, other builders such as Lennar (LEN) and KB Home (KBH) continued to advance even with mortgage rates rising.
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Big Fiber-Optic Gear Firms Miss Earnings Views
Ciena (CIEN) and Finisar (FNSR), both reported weaker-than-expected earnings and revenue, sending both stocks plunging and putting pressure on other fiber-optic gear makers. Ciena, a maker of fiber-optic systems, said fiscal Q1 adjusted earnings per share rose 44% while revenue climbed 8% but missed analyst forecasts. Ciena's current-quarter revenue guidance midpoint is above the Wall Street consensus.Finisar, a maker of optical components, reported adjusted Q3 EPS surged 136% while revenue jumped 23% to $380.6 million, also below targets. Finisar also guided low for the current quarter.
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Children's Place Thrives As Many Peers Struggle
The kid's apparel chain's earnings jumped 58%, easily beating views. Sales grew 4%, slightly below views, but same-store sales climbed 6.9%. Children's Place also gave upbeat earnings guidance. The retailer also doubled its dividend and OK'd a stock buyback program. Children's Place shares surged 18% on Wednesday to a record high. Meanwhile, apparel, department and other brick-and-mortar retailers are struggling.Urban Outfitters (URBN) fell modestly after reporting earnings and sales just below views. Express (EXPR) dived on weak guidance while men's apparel retailer Tailored Brands (TLRD) crashed on an all-around grim report.
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Street Raids RV Maker's Camp
Thor Industries (THO) got decked after RV maker reported thinner margins for fiscal Q2, and the company said it would increase spending during the fiscal year amid rising demand. REV Group (REVG), which owns a variety of RV, firetruck and ambulance manufacturers, reported a mixed fiscal Q1 but guided full-year sales just above views. REV Group also fell during the week but reversed up. Sales of RVs could pick up as the economy improves and baby boomers retire, while an aging population and needed upgrades put off during the recession could lift demand for firetrucks, ambulances and related parts.
Camping World (CWH), a retailer of camping supplies, reported solid earnings but sales fell short.The stock, which came public in early October, fell 6% on Thursday, undercutting a recent buy point.
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