Stocks had their worst day in years on Friday, spooked by rising interest rates and falling oil prices. Indexes declined steadily throughout the day to close near their lows. The Dow Jones Industrial Average (DJINDICES:^DJI) lost over 600 points and the S&P 500 (SNPINDEX:^GSPC) erased more than a third of its January gains.
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Energy stocks led the way down, with the Energy Select Sector SPDR ETF (NYSEMKT:XLE) plummeting 4.2%. Tech stocks also corrected after some big earnings reports; the Technology Select Sector SPDR ETF (NYSEMKT:XLK) fell 3%.
Investors look past Mattel's dreadful quarter
Toymaker Mattel reported disappointing sales and earnings last night, but investors took a positive view on the company's future, pushing up the stock price 7.9%. Fourth-quarter sales declined 12.2% to $1.61 billion alongside an adjusted loss per share of $0.72. Analysts were expecting a profit of $0.17 per share on a sales decline of 7.8%.
The decline in sales was attributed to disruptions caused by the September bankruptcy of Toys R Us, tighter inventory control by retailers, and the underperformance of some of Mattel's brands. Worldwide gross sales of the Fisher-Price brands were down 12% and American Girls dolls fell 23%, but Mattel Girls & Boys brands sales were up 1% and Barbie increased 9%. Sales in North America were down 17%, and adjusted gross margin fell from 47% in the quarter last year to 32%.
"We have taken aggressive action to enter 2018 with a clean slate so that we can reset our economic model and rapidly improve profitability," said CEO Margo Georgiadis. "We are optimistic about stabilizing revenue in 2018 anchored by our key power brands, entertainment partnerships and exciting new launches."
Investors seem to feel that the worst could be over for Mattel after the company took a big hit in Q4 from inventory adjustments, both in the retailer channel and company-owned inventory. With the channel dislocations behind it, a cost-cutting program in place, and some brand refreshes in 2018, the market seems to be concluding the company's situation may be stabilizing.
Exxon reports unimpressive results on declining production
ExxonMobil reported sharply higher earnings due to a one-time tax benefit, but excluding that windfall, earnings were significantly lower than what analysts were expecting, and the stock dropped 5.1%. Net earnings for Q4 were $8.38 billion including tax benefits and other extraordinary items, and $3.7 billion excluding those. Adjusted EPS fell 2% to $0.88 while analysts were expecting $1.04.
Revenue increased 17.9% to $66.5 billion, but analysts were expecting $74.3 billion. Oil-equivalent production actually declined 130,000 barrels a day, though, or about 3.2%. Production in the U.S. fell 244,000 barrels per day and lost money if tax breaks and impairments are excluded.
"The impact of tax reform on our earnings reflects the magnitude of our historic investment in the U.S. and strengthens our commitment to further grow our business here," said Chairman and CEO Darren W. Woods in the press release. "We're planning to invest over $50 billion in the U.S. over the next five years to increase production of profitable volumes and enhance our integrated portfolio, which is supported by the improved business climate created by tax reform."
Rising oil prices have unleashed a boom in U.S. oil production that could make it the global leader in 2018, but Exxon doesn't seem to be getting its fair share of that growth. Most energy stocks were down today anyway, but investors may be registering their disappointment with the company's lack of growth despite this positive environment.