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What Happened in the Stock Market Today

By Demitri Kalogeropoulos – Nov 15, 2016 at 5:45PM

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Home Depot and Advance Auto Parts stocks saw big price swings as indexes rose on Tuesday.

Image source: Getty Images.

Stocks rose on Tuesday, with the Dow Jones Industrial Average (^DJI 0.43%) pushing further into record territory and the S&P 500 (^GSPC 0.57%) also booking a significant gain.

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Data source: Yahoo! Finance.

A minor pullback in banking stocks produced the first daily decline for the Financial Sector Select SPDR Fund (XLF -0.22%) since Donald Trump captured the White House last week. Oil prices rose on speculation that OPEC nations could soon agree to lower their output, and that news pushed the United States Oil Fund (USO 1.82%) higher by 4%.

As for individual stocks, Home Depot (HD 0.71%) and Advance Auto Parts (AAP 0.90%) each had notable price swings on Tuesday powered by quarterly earnings results.

Home Depot

Home Depot's stock sank 3% after its third-quarter earnings report left Wall Street wanting more. The retailer gave investors plenty to be happy about, though. Sales growth sped up to a 5% pace from 4% in the prior quarter. Home Depot continues to enjoy benefits from increasing customer traffic, even if the pace has moderated to 2.5% from last year's 4% spike. It took increased average spending per visit to push comparable-store sales higher quarter over quarter. "We experienced balanced sales growth in the quarter driven by an increase in both ticket and transactions," CEO Craig Menear said in a press release.

Things looked even better when it comes to profits. Restrained expense growth helped earnings rise at a much faster pace than sales, with net income jumping 14% to $2 billion. Meanwhile, Home Depot's aggressive stock repurchase spending sent the share count 4% lower, and that contributed to a 19% per share earnings improvement to $1.60.

Image source: Getty Images.

Looking ahead, the company affirmed its full-year sales outlook that calls for steady comps growth of 5% to mark a slight slowdown from last year's 7% jump. Some investors might have been holding out for a growth upgrade, but instead they got a slight profit beat. Home Depot raised its full-year earnings guidance for the third straight quarter and now sees earnings rising 16% to $6.33 per share in 2016.

Advance Auto Parts

Advance Auto Parts shares spiked 15% after the company announced improving operating trends for its fiscal third quarter. Comparable-store sales declined by 1% for a solid uptick over the prior quarter's 4% slump. As a result, Advance beat consensus estimates by posting $2.25 billion in revenue. The auto parts retailer also edged Wall Street targets on the profit line as earnings declined to $1.73 per share from $1.95 per share. Analysts had been expecting $1.71 per share of profit. This outperformance occurred despite a decline in profitability to 44% of sales from 45% last year.

Image source: Getty. 

"Our third quarter results reflect progress in driving our top line as the initiatives and investments we are making to stabilize and improve our sales performance began to take hold," CEO Tom Greco said, while stressing that management still sees plenty of work to do ahead. "We remain relentlessly focused on taking the actions necessary to improve our execution and generate positive comparable sales performance."

Stock price spikes don't normally happen after a retailer posts falling profit margins and declining sales. But management announced a few encouraging details on their long-term plan.

Executives see much stronger comps growth over the next five years as operating margin rises by "at least" 5 percentage points, they explained in an investor presentation. It would take a real shift in momentum to achieve these goals, but they seem possible, given that rival O'Reilly currently enjoys a 20% operating margin, or about double Advance Auto Parts' figure.

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool owns shares of O'Reilly Automotive. The Motley Fool recommends Home Depot. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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