It's been about a week since I've said this, but mixed-to-poor economic data did in the S&P 500 (^GSPC -0.22%) today, and backed the broad-based index away from hitting a third consecutive all-time high.
The primary culprit was the weekly initial jobless claims report, which gained 16,000 to a seasonally adjusted 326,000 -- a bit higher than economists had predicted. Let's not kid ourselves that predicting the weekly vacillations in initial jobless claims is anything but science and winds up as nothing more than a glorified guess. Therefore, today's miss isn't all too concerning. However, investors would prefer that weekly initial jobless claims never rise, as it could signal more people are having difficulty finding work. I'd note that any seasonally adjusted figure below 350,000 would likely support the slow expansion of the labor force and a reduction in the unemployment rate, but today's move upwards was clearly viewed as unwelcome.
Also, the U.S. trade balance for February ran to a deficit of $42.3 billion compared to a deficit of $39.3 billion in January. A higher deficit could signal weakness in demand for American goods overseas, which hurts both domestic manufacturers and the overall economic recovery within the U.S.
If there was one partial bright spot, it was the ISM Services reading for March of 53.1, which rose notably from the 51.6 reported in February. Any reading above 50 signals expansion in the services sector, and this rebound likely coincides with better weather across much of the U.S. last month.
By day's end, though, the S&P couldn't make it three times the charm, and fell by 2.13 points (-0.11%), to close at 1,888.77.
Tank facility, Uinta Basin, Source: Anadarko Petroleum.
Despite the index pushing to the downside, oil and gas exploration and production giant Anadarko Petroleum (APC) advanced 14.5% after announcing this afternoon that it and its Kerr-McGee subsidiary had settled a nearly $21 billion lawsuit brought against it by Tronox (TROX 0.19%) for legacy environmental clean-up costs totaling $5.15 billion. Although this represents the biggest environmental bankruptcy settlement on record, it's going to actually result in a $550 million net tax benefit for Anadarko. With this ongoing gray cloud finally pushed into the rearview mirror (and for less than expected), Anadarko shareholders are clearly pleased. While I would be, as well, if I were a shareholder, Anadarko's forward P/E of 18 following today's run higher, coupled with its less than 1% yield, makes it an easily forgettable company in the oil space with regard to investable potential.
Sticking within the energy sector, Gastar Exploration (NYSEMKT: GST) rose 4.5% after hosting an analyst meeting yesterday that highlighted its Marcellus Shale and Utica shale drilling strategy for existing and undrilled locations. Gastar outlined its plans for more than 400 net Hunton oil play drilling locations, and updated its net resource recovery in the Marcellus Shale to be approximately 700 bcfe of natural gas. In response to this meeting, research firm MLV & Co. boosted its price target on Gastar to $8.50 from $6.50, and reiterated its "buy" rating on the stock. Considering that Gastar is valued at just nine times forward earnings, the stock does appear inexpensive, but I would also like to see it make a concerted effort to work down its $313 million in debt further.
Finally, specialty chemicals manufacturer for the industrial and consumer sectors, RPM International (RPM 0.45%), gained 4.7% after reporting record third-quarter results before the opening bell. Despite weaker weather, which hampered sales growth, net sales still improved 2.3%, to $863.4 million, as net income expanded to a record $16.2 million, or $0.12 per share, reversing a year-ago loss of $42.4 million. Overall, EPS topped Wall Street's expectations by $0.03 per share, while revenue was about $14 million shy of estimates. Most importantly, it boosted its EPS guidance for the full year to a new range of $2.10-$2.15 from prior guidance of $2.05-$2.10, which RPM attributed to better industrial leverage across Europe and throughout U.S. construction markets. RPM has 40 consecutive dividend increases under its belt, and it's geographically and vertically diversified; I still view the company as still having good upside potential over the long run.
