What Happened in the Stock Market Today

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Stocks closed the week by posting mixed results on a low-volume day, with the Dow Jones Industrial Average (DJINDICES: ^DJI) essentially unchanged and S&P 500 (SNPINDEX: ^GSPC) up less than 0.2%.

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Today's stock market

Index Percentage Change Point Change
Dow (0.01%) (2.53)
S&P 500 0.16% 3.8

Energy shares rebounded after the price of crude oil recovered to above the $43 mark, and the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT: XOP) gained 2.7%.

As for individual stocks, shares of Bed Bath & Beyond (NASDAQ: BBBY) sunk after the company reported poor performance from its brick-and-mortar stores, and EQT Corporation (NYSE: EQT) and Rice Energy (NYSE: RICE) rose in anticipation of a large merger in the natural gas industry.

Bed Bath & Beyond shares get a discount

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Bed Bath & Beyond stock fell sharply today after the retailer reported fiscal first-quarter results that disappointed investors on both the top and bottom lines. The company earned $0.53 per share on revenue of $2.7 billion, essentially the same as sales in the year-ago quarter. Wall Street was looking for EPS of $0.66 on sales of $2.8 billion, according to consensus estimates. Shares plunged 12.1%, to a low not seen since 2009.

The company reported a 20%-plus increase in online sales, but that was not enough to make up for a mid-single-digit drop in comparable sales in its physical stores. Overall comparable sales fell 2% in the quarter after a decline of 0.6% over all of fiscal 2016. Profits were hit by higher direct-to-consumer shipping costs, coupon expense, and advertising costs.

Despite the mismatch with what analysts were expecting, the company maintained guidance for the full fiscal year given three months ago, emphasizing technological improvements to its digital channels to compensate for the challenging environment that brick-and-mortar stores are experiencing across the retail industry. "[W]e are not updating our modeling assumptions for the year at this time," said CEO Steven Temares in the conference call. "However, the quarter again exemplified the challenges presented by declining foot traffic in stores and the opportunities presented by omni channel retailing. It is an exciting and rapidly evolving period in retail driven by the swift adoption of ever improving technology."

Investors are no doubt hoping for a little less excitement in upcoming quarters.

The market warms up to a merger of EQT and Rice Energy

Shares of EQT Corporation advanced as analysts digested the implications of the announcement Monday that it was acquiring Rice Energy in a combination cash-and-stock deal worth $6.7 billion. The stock had fallen on the news earlier, but recovered 8% today to close down 4.4% for the week. Shares of Rice Energy also rose today, tacking on 6.8%.

The merger will create the largest natural gas producer in the U.S. The Rice Energy properties are mostly adjacent to those of EQT, which will allow the pipeline systems of the combined companies to be more efficient than they would be when operated separately, and their holdings in the Marcellus and Utica shale formations are already some of the lowest-cost gas-producing properties in the country. EQT says the deal will add 20% to cash flow in 2018 and 30% in 2019, enable $2.5 billion of annual cost savings, and open up better pipeline access for the combined company to premium gas markets in the Gulf and Midwest. 

"This transaction brings together two of the top Marcellus and Utica producers to form a natural gas operating position that will be unmatched in the industry," said EQT CEO Steve Schlotterbeck in the press release announcing the deal. "Rice has built an outstanding company with an acreage footprint that is largely contiguous to our existing acreage, which will provide substantial synergies and make this transaction significantly accretive in the first year."

It took the market a little time to warm up to the merits of the deal, but on a day when natural gas prices rose, investor interest in what will be a new industry leader perked up.

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Jim Crumly has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond. The Motley Fool has a disclosure policy.