Market Moves

Stocks pulled back mildly today as trade deal chatter turned negative. The news didn't stop investors from buying up Apple Inc. (AAPL) shares as the company beat estimates and raised guidance. This was no mean feat since investors had already priced in very high expectations for the company's results. Even though iPhone sales disappointed expectations, iPad sales and the sales of Apple TV subscriptions greatly exceeded what investors forecast.

Apple's headlines captured most of the attention from investors after yesterday's closing bell. However, 30 minutes after Apple reported its quarterly results, a significant earnings surprise came from a company that few if any expected to make headlines.

Shares of Murphy USA Inc. (MUSA), an Arkansas-based specialty retailer that operates a chain of gas and grocery stores located primarily in the Midwest, jumped over 24% on its latest quarterly news. It seems that this is yet another company whose surprising results came from operations conducted in this region. It may be worth considering whether there is more to this trend than a few isolated anomalies.

Chart showing the share price performance of Apple Inc. (AAPL)

Convenience Is Key

Over the summer, consumer staples stocks surged, led by companies in the fast food and retail industry groups, while technology stocks lagged. When September's end seemed to wake up technology investors, the fast food industry stumbled. But retail stores of one kind or another have seemed to hang on to their gains.

While the consumer staples sector, as tracked by State Street's SPDR Consumer Staples ETF (XLP), has topped 25% gains this year already, certain stocks within the sector have surpassed expectations. A comparison of some of these companies, shown in the chart below, details how McDonald's Corporation (MCD), Dunkin' Brands Group, Inc. (DNKN), Starbucks Corporation (SBUX), and The Wendy's Company (WEN) have done well so far but lately have been eclipsed by stocks like Dollar General (DG) and Murphy USA stores. These stocks cater to people in the Midwest small towns, people whose livelihoods have been revitalized by a surging economy. Is it possible that these companies are riding a wave of consumerism driven by more discretionary cash available from their customers?

Chart showing the performance of fast food and convenience store stocks

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The comparison between Dollar General shares and Murphy USA shares is not insignificant. Both of these companies surprised investors on their recent earnings reports. With MUSA shares up strongly today, both of these companies have risen 40% in the past two quarters.

Notably, both of these companies share a similar customer base. Small towns throughout the rural Midwest are significantly served by these and other companies. It may be possible that the repatriation of factory jobs and other initiatives have led to a more financially empowered consumer segment in this region. Investors would do well to watch for other companies that may be reaping similar benefits. 

Chart showing the share price performance of Dollar General and Murphy USA

The Bottom Line

Stocks closed lower as traders exhibited mild profit-taking action on trade talk news. Apple's earnings did manage to exceed the already high expectations of investors. The fact that flyover-state companies might be doing well may not be simply a coincidence. As Murphy USA shares jumped to bring them on par with the performance of Dollar General share prices, an astute observer might be tempted to wonder if there are more stock-price jumps like theirs still yet to come.

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