The broader media was quick to dub this week part of a potential "Trump slump," which has a ring to it, after the S&P 500 and Dow Jones Industrial Average respectively traded 1.44% and 1.52% lower this week. But let's not get ahead of ourselves -- it's still been a solid year so far for the markets, and the economy continues to improve.
Part of the issue Friday was undoubtedly that the House Republicans pulled the healthcare bill after failing to drive enough support for it, which throws a kink in the legislative priorities for the administration. In other news, more positive this time, orders for durable goods -- products that are intended to last at least three years -- jumped 1.7% in February compared to January. That result was higher than economists' 1.5% estimates.
All that aside, here were two companies making big moves and big headlines this week in the markets.
Image source: Getty Images.
Let the countdown begin
It seems as if Sears Holdings Corp. (SHLDQ) has been on its deathbed for years, and that's truer than ever now. Management has been able to sell assets and cling to life, but it finally appears time is about to run out. Shares of the outdated retailer were down more than 14% during intraday trading Wednesday after management acknowledged bankruptcy was a concern in its annual Securities and Exchange Commission filing.
This is the wording within the annual report: "Our historical operating results indicate substantial doubt exists related to the Company's ability to continue as a going concern." This doesn't come as much of a surprise, especially if you glance at the company's top and bottom lines over the past decade.
Beyond top- and bottom-line difficulties, the core issue at Sears is that its customer base has all but evaporated, and many of its mall locations have also suffered a severe drought in foot traffic. In fact, Sears' comparable-store sales fell 12% to 13% during the November-December holiday sales period.
At the end of the day, Sears is bleeding cash; in fact, the company has been free-cash-flow negative for more than five years, and it burned more than $1.7 billion during 2016 alone. Sears is simply the latest retailer that's suffered due to the boom in e-commerce, and if there was any doubt about its future, the recent annual filing essentially puts the nail in the coffin.
Fake news?
We've all heard President Donald Trump's rallying cry about fake news, among other things, but it appears Trump is now the one walking back on big talk. More specifically, shares of AK Steel Holding Corp. (AKS) closed 10% lower on Tuesday after rumors popped up that the president's promise to rebuild the country using U.S. steel could have been more an exaggeration than a commitment.
There are a couple of examples that could have steel investors worried, and rightfully so. One example is LaGuardia Airport's $4 billion renovation that won't be an all-American job, per the New York Daily News. This was the response: "The public-private-partnership contract has a requirement that 50% of the steel be domestic and LaGuardia Gateway Partners -- our PPP partner -- is meeting that goal," a spokesman said, according to the New York Daily News. Trump has also been shying away from making good on his promise to use only pipe made in the U.S. to build the Keystone and Dakota Access pipelines
And while those factors have led skittish investors to sell the stock, there could be more downside for investors. That's because AK Steel is highly leveraged to the automotive market, and North American new-vehicle sales are currently plateauing and production could be cut later in 2017 to help match supply and demand.
Furthermore, regardless of what happens in D.C. with emissions policies, it's clear that the industry is going to continue moving to more fuel-efficient solutions. That leaves the door open for aluminum to take market share from steel in the automotive industry; we've already seen a huge example as Ford's F-150 uses aluminum in place of steel on body panels, and that's the best-selling vehicle in the U.S. market.
A lot of factors are up in the air for AK Steel, but what's clear is some of the optimism from Trump's infrastructure promises is wearing off, and it's negatively impacting the company's stock.
