What Happened in the Stock Market Today

By Demitrios Kalogeropoulos Markets Fool.com

Stocks posted mixed results on Wednesday as the Dow Jones Industrial Average(DJINDICES: ^DJI)lost ground and the S&P 500 (SNPINDEX: ^GSPC)ticked higher. Both indexes moved less than 0.25% from their opening values.

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Today's stock market

Index

Percentage Change

Point Change

Dow

(0.20%)

(42.18)

S&P 500

0.11%

2.56

Data source: Yahoo! Finance.

Financial stocks again attracted heavy investor interest, but the popular Financial Select Sector SPDR ETF (NYSEMKT: XLF) trailed broader indexes with a 0.6% dip. A decline in gold prices, meanwhile, didn't keep the leveraged bullish bet on the precious metal, Direxion Daily Gold Miners Bull 3X ETF (NYSEMKT: NUGT), from rising 1.3%.

As for individual stocks, both RH (NYSE: RH) and Sonic (NASDAQ: SONC)enjoyed big gains following the companies' quarterly earnings reports.

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Image source: Getty Images.

RH sees a turning point ahead

Shares of RH, formerly known as Restoration Hardware, surged 15% following the luxury furniture specialist's fiscal fourth-quarter earnings announcement. The headline numbers weren't pretty. Comparable-store sales dove 18% and net income sank to $9.4 million from $33.3 million in the prior year. Operating margin fell to less than 9% of sales from 11.5% as the business shrank both in its physical locations and in direct catalog purchases.

Still, the top- and bottom-line figures both edged past analysts' expectations, which suggests that the retailer could finally be turning a corner. "Exiting fiscal 2016, we are now through the most uncertain stages of our transformation," CEO Gary Friedman said. The transition included significant inventory writedowns and a disruptive shift to a membership model from a promotional approach. These changes hurt the business in the short term, but executives believe they put it in better position for steady growth in fiscal 2017 and beyond.

To that end, Friedman and his team forecast revenue gains of between 8% and 12% this year, compared to a 1% bump in 2016. Operating margin should expand as well. Management cautioned that the selling environment is still soft, but the broader optimism on business trends was enough to send shares sharply higher.

Sonic's refranchising move boosts profits

Sonic shares jumped over 5% after the drive-in restaurant chain posted its fiscal second-quarter report. Sales fell 7%, which management blamed on three factors: a tough industry environment, poor weather, and unusually strong growth over the prior two years. Sonic also suffered a painful 3.3-percentage-point decline in operating margin in the quarter.

Image source: Sonic.

However, thanks to a refranchising effort that saw 54 drive-in locations move from being corporate-owned to franchisee-owned, in addition to aggressive share repurchase spending, earnings rose 14% on a per-share basis, to $0.25.

Sonic's fiscal year projection still calls for sales to decline by 1% at the midpoint of guidance. Management also lowered its restaurant-level profit forecast to between 15.5% and 16% from the prior forecast of 16% and 17%.

Yet investors were apparently pleased with Sonic's comments on the latest business trends, since they imply improvement in both sales and earnings growth. "As we enter the key spring and summer seasons," CEO Cliff Hudson said, "we believe a better balance of new product and targeted value will result in sequential improvement in same-store sales and profitability." The stock was down 24% over the past 12 months, and so that hint of a slight rebound translated into market-beating gains on Wednesday.

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Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends RH. The Motley Fool has a disclosure policy.