Trade tensions between the U.S. and China rose Tuesday and so major benchmarks fell. The U.S. Commerce Department added 28 Chinese companies to an export blacklist. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) dropped more than 1%.
Semiconductor stocks were hit particularly hard by trade concerns, but financial, energy, and pharmaceutical shares also tumbled today.
Investors shrug off underwhelming performance by Domino’s Pizza
Domino’s Pizza delivered third-quarter results that missed expectations, and despite a cut to its outlook, shares rose 4.7%. Revenue grew 4.4% to $820.8 million and earnings per share increased 5.1% to $2.05. Analysts were expecting the company to earn $2.07 per share on revenue of $823.9 million.
Global retail sales increased 7.5% excluding currency effects, thanks largely to growth in the number of stores. Same-store sales growth in U.S. stores was 2.4%, less than half the growth of 6.3% in the period a year ago. International same-store sales were up 1.7%. The company added a net 214 new stores in the quarter, bringing the store increase over the trailing four quarters to 7.6%.
Domino’s cut its sales growth forecast from 8%-12% over three to five years to 7%-10% over the next two to three years. On the conference call, the company cited pressure from competitors that are offering unsustainable bargains like free delivery. But analysts have already factored the restaurant’s competitive environment into their estimates, expecting only 8.5% revenue growth next year, and the company’s “fortress” strategy of building more stores to increase market share seemed to head off concerns about a further deceleration of growth.
More delays for the 737 MAX
A report in The Wall Street Journal today said that disagreements between European regulators and the U.S. Federal Aviation Administration may lead to further delays in 737 MAX jets returning to service. Boeing shares slipped 0.7% on the news.
According to the report, people familiar with the matter said that the dispute is over software changes to add redundancy by having the plane’s two flight-control computers work together to eliminate hazards from possible chip malfunctions. If the disagreements aren’t resolved, additional testing may hold up European approval to return the jets to service.
Boeing CEO Dennis Muilenburg said at an investor conference last month that he expected that the 737 MAX could be cleared to fly early in the fourth quarter, but that timing is looking unlikely. Boeing still has a strong long-term future ahead of it, but it could be toward the end of the year before the 737 MAX changes are approved by regulators, and even a few months longer before airlines have pilots trained and the planes in the air.