What Happened in the Stock Market Today

Stocks fell on Thursday, with both the Dow Jones Industrial Average (^DJI 0.56%) and the S&P 500 (^GSPC -0.88%) indexes posting minor declines. Healthcare was the market's worst-performing sector, followed closely by energy.

Today's stock market:

Data source: Yahoo! Finance.

As for individual stocks, earnings announcements produced a few major price swings -- Guess (GES 0.51%) jumped as the retailer outperformed low expectations, and Dollar General (DG -0.59%) tumbled after posting a surprise slowdown in growth.

Guess shocks the bears

Guess stock soared 22% after the apparel specialist announced a return to profitability in the second quarter and projected stronger gains ahead. The overall results were not exactly impressive. Sales came in flat at $545 million, and operating earnings plunged 41% thanks to a declining gross profit margin as expenses held steady. 

Image source: Guess.

Still, the retailer's $0.14 per share profit trounced management's $0.06 per share target as the business stabilized in the U.S. market and grew solidly in Europe. Guess logged a 3% drop in comparable-store sales in the U.S., marking an improvement over the prior quarter's 6% decline.

"We are pleased to deliver second quarter earnings that exceeded our expectations both in earnings per share and operating margin," CEO Victor Herrero said in a press release.

Guess has a long way to go to reach anything approaching the double-digit margin it posted as recently as 2013. In fact, Herrero and his team only see their company achieving 4% operating margin for full-year 2016.

Still, that's much better than the net loss Guess has generated over the first six months of the year, and the latest trends have executives convinced that the next two quarters will bring positive -- and accelerating -- growth. That optimism, fueled by improving customer traffic trends, was enough to spark investor interest in a stock that hit multi-year lows heading into this report.

Dollar General takes a step back

Discount chain Dollar General slumped nearly 18% to become the S&P 500's biggest loser after posting a slowdown in second quarter sales growth. Comps fell below 1% from the prior quarter's 2% uptick. The surprisingly weak result was driven by a combination of negative trends, including food price deflation, lower SNAP benefit spending, and unseasonably mild spring weather. 

Competitive retailing threats also intensified during the second quarter, executives explained, while noting that the company still managed to hold the line on pricing and costs. "Even amid a challenging sales environment," CEO Todd Vasos said in a press release, "we effectively managed our gross profit margin and leveraged our selling, general and administrative expense as a percent of sales." Gross profit margin was unchanged at 31% of sales, and bottom line profitability actually ticked up to nearly 6% of sales.

Image source: Dollar General.

Still, the retailer sees customer traffic growth as a foundation to its operating model. That's why executives plan to respond to the slowdown by tweaking merchandising and promotion plans in hopes that comps begin growing again soon. Dollar General appears to have some flexibility to match competitive price cuts, if necessary. Its gross margin is higher than that of comparable retailers, including Dollar Tree and Wal-Mart.

Meanwhile, the business is likely to stay solidly profitable this year. Vasos and his team affirmed their forecast of double-digit earnings growth.