Good news was bad news on Friday. While a better-than-expected drop in the unemployment rate and a surge in the number of new jobs created in February points to a strong economy, it also gives the Federal Reserve a reason to raise interest rates earlier than investors were hoping they’d have to face that hawkish music.
By the time the closing bell rang, the S&P 500 had lost 1.42% if its value, closing at 2071.26.
It was much worse than that for some stocks, though. Darling Ingredients Inc. (NYSE:DAR), Newmont Mining Corp. (NYSE:NEM) and Esterline Technologies Corporation (NYSE:ESL) were downright shellacked by today’s bearish tide.
Here’s what made these three names uglier than most others on Friday.
Newmont Mining (NEM)
Just for the record, though Newmont Mining was deep in the red on Friday, it was hardly alone en route to the bottom of the barrel. Gold mining peers Goldcorp Inc. (NYSE:GG) and Barrick Gold Corporation (NYSE:ABX) were also selling off in a major way.
In fact these three stocks were the three biggest losers among all U.S.-traded large-cap stocks today. NEM was simply the worst of the three, giving up more than 8% of its value before the closing bell rang.
At the heart of the pullback for NEM, ABX, GG and most gold stocks were slumping gold prices, which were off because of a strengthening U.S. dollar, which strengthened (to new multi-year highs, no less) because of unexpectedly strong employment numbers for February.
With the unemployment rate falling from 5.7% to 5.5% and 295,000 new jobs being created last month, the Federal Reserve may be able to raise interest rates sooner than had been expected. Rising U.S. interest rates push the value of the U.S. dollar upward as well, which puts pressure on gold prices, and by extension puts pressure on gold miners like Newmont Mining and Goldcorp.
Esterline Technologies (ESL)
Aerospace contractor Esterline Technologies didn’t do nearly as well as was expected in its first fiscal quarter, and ESL shareholders paid dearly for the shortcoming today.
When all was said and done, Esterline Technologies turned $446.3 million in revenue generated during its Q1 into an operating profit of 98 cents per share of ESL. Problem: The market was collectively expecting a top line of $508 million and a bottom line of $1.36 per share of ESL.
It wasn’t the disappointing numbers alone, though, that sent the stock careening more than 9% on Friday. The death blow was more likely dealt by Credit Suisse, which downgraded Esterline Technologies in the wake of the news. Credit Suisse analyst Robert Springarn lowered his rating on Esterline from “outperform” to “neutral,” and also lowered his target price on ESL from $131 to $117.
Darling Ingredients (DAR)
For the second day in a row, shares of Darling Ingredients fell sharply, with today’s 8% rout bringing the two-day loss to more than 14%.
The prompt for the pullback was Wednesday evening’s report of fourth-quarter earnings, which were — surprisingly enough — better than expected. The company earned 42 cents per share of DAR versus estimates of only 21 cents, and revenue of $1 billion versus expectations of only $956.9 million.
The specific cause for concern may have been something CEO added to the quarterly report. Randall Stuewe noted:
“Our business continued to experience headwinds in fourth quarter 2014 from globally lower prices for our finished products and a stronger U.S. dollar.”
Though the company feels the worst of it should be in the past, investors — and analysts — aren’t so sure. Goldman Sachs downgraded Darling Ingredients from “buy” to “neutral” on the news and lowered its price target on DAR to $17.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
