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What Investors Missed in the Stock Market This Week

The major headline last week concerned employment data for May. In the face of slowing GDP growth over the past year, job growth had been resilient -- though it was only a matter of time before that balanced out. The question was if it would happen swiftly or gradually. The answer came Friday, when the jobs growth figure checked in at a disappointing 73,000 workers -- and that's after adjusting for Verizon workers on strike, otherwise it would look worse. Either way, the result was well below expectations of 158,000.

That disappointing data initially sent both the S&P 500 (SNPINDEX: ^GSPC) and the Dow Jones Industrial Average (DJINDICES: ^DJI) lower, but both managed to retrace the lost ground before ending the week up 0.51% and down 0.08%, respectively.

Unfortunately, that wasn't the only disappointing data served to investors over the past five days. Let's take a look at a slowdown in the automotive industry, as well as other stocks making big moves this week.

More than meets the eye

Gmrenaissancecenter

GM's Renaissance Center in Detroit. Image source: General Motors.

There's no doubt the U.S. automotive industry had a disappointing May, but there is some explaining to do behind the 6.1% decline in new-vehicle sales, compared to the prior year's May. First, there were two fewer selling days this May compared to last year, which made it a tougher comparison right off the bat. Moreover, last year's May had a calendar quirk that put five weekends in the month, but this year's May only had four weekends. Since many vehicles are sold on the weekends, when showroom foot traffic is heavier, this also contributed to the weaker results. Those factors aside, the Seasonally Adjusted Annual Rate (SAAR) checked in at 17.46 million units, which was right in line with last year's full-year average.

The biggest loser appeared to be General Motors (NYSE: GM)  -- at least at first glance. General Motors' domestic sales dropped 18% last month. However, in addition to the calendar issue, the automaker also had an unplanned disruption to three of its production/assembly plants in mid-April after a series of earthquakes hit Japan and impacted suppliers.

The disruption will only be a speed bump since the automaker has noted it can make up the lost production throughout this quarter, but it did negatively impact sales in May. GM has also focused on reducing its fleet sales to daily rental companies while continuing to sell into commercial and government fleets. That reduction in less-desirable rental fleet sales equates to 82,000 unit sales not taking place this year, which obviously has a negative impact on GM's year-over-year comparisons. For context, if you add those 82,000 sales back into GM's year-to-date sales in the U.S., it hypothetically takes a 5% decline in sales to a 1.8% gain, roughly.

Commodity woes

Joy

Image source: Joy Global.

Outside of the automotive industry, and on a positive note, shares of Joy Global Inc. (NYSE: JOY) jumped more than 22% this week, making it one of the best performers in the S&P 500.

The driving force behind the jump was Joy Global's fiscal second-quarter results. There initially didn't seem to be much to be excited about given that service bookings declined 14% to $514 million, offsetting a 12% rise in equipment bookings for $167 million. Total bookings were thus down 9% to $681 million during the second quarter.

Net sales also fell 26% compared to a year ago, down to $602 million, and cash from operations declined $27 million from a year ago to $44 million. It was a challenging quarter, but those results were expected as the slump in commodity markets continues to hammer companies like Joy Global.

Given this, why did shares of Joy Global shoot up after the company reported second-quarter results? It came down to the company's adjusted earnings per diluted share, which checked in at $0.09. That result was a fraction of last year's $0.64 per share during the second quarter, but it was ahead of Wall Street expectations of $0.03 per share.

Ultimately, it seems as if investors are beginning to feel the commodity markets have hit bottom, and that the worst could soon be over for companies like Joy Global.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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