Six in 10 stocks advanced in the stock market today, as weekly jobless claims came in lower than expected. The four-week moving average, a much-watched measure of the employment market's health, came in at 312,000, the lowest reading since October 2007. But no matter how uplifting the economic news was today, nothing could stop shares of The Western Union Company (WU -2.28%), BB&T Corporation (TFC -2.24%), and International Business Machines (IBM -8.47%) from trailing the market, as investors got whiff of significant headwinds facing all three companies. The S&P 500 Index (^GSPC -1.30%), for its part, finished the shortened trading week with a fourth straight day of gains, adding two points, or 0.1%, to end at 1,864.
Source: Western Union website
Western Union took a steep 5% tumble on Thursday after news that Wal-Mart is encroaching on its market. The $250 billion Wal-Mart, the largest private employer in the U.S., announced that it will offer its own money transfer service at more than 4,000 domestic locations next week. Vowing to undercut the fees of competitors like the $8.3 billion Western Union, the retail giant represents a major threat that shareholders fully recognized today. Not only is Wal-Mart pervasive in the U.S., but it has an international presence, which could threaten Western Union's long-term business, as well.
BB&T stock lost 3.6% today, as a slump in mortgage origination hit revenue, which fell nearly 7%. While net income jumped nearly 140% from the same period last year, earnings per share, coming in at $0.69 in the first quarter, just didn't cut it for Wall Street, which expected an EPS of $0.70. Net interest margin, a key metric of bank profitability, fell from last quarter, as BB&T had to shift capital to its investment portfolio due to liquidity rules.
Finally, shares of IBM, the second heaviest-weighted component in the Dow, shed 3.3% on Thursday. Revenue fell at the tech giant for an eighth-straight quarter, slumping 4% from the first quarter of 2013, and investors recoiled at the sales miss. Profits were right on target, as EPS came in at $2.54 for the period, but CEO Ginni Rometty said many of the company's investments would be long-term projects. Wall Street tends to abhor long-term projects if they don't play out quarterly. What's overlooked in this obsession over quarterly results is that long-term projects often end up being the most profitable. Areas like big data analytics, the cloud, and artificial intelligence could end up being these long-term payoffs for IBM, but its inability to capitalize on these investments more immediately is starting to wear on shareholders.
