Despite its best effort to get stocks started on a bullish foot this week, the market simply couldn’t hang on to its early gains.The broad market lost another 0.6% on Monday against the backdrop of a 4% dip in the price of crude oil.
The fact that industrial productivity was up 1.3% last month and capacity utilization grew from 79.4% to 80.1% went largely unnoticed despite the fact that it was encouraging bigger-picture news; traders were simply too busy watching the unfurling marketwide train wreck to bother recognizing the broad economy is still plenty solid.
In any case, you have ISIS Pharmaceuticals, Inc. (ISIS), Linn Energy LLC (LINE) and Yandex NV (YNDX) to thank for leading Monday’s meltdown. Here’s what sparked the mass selling of those stocks.
Yandex NV (YNDX)
The so-called Google Inc. (GOOG) of Russia, Yandex got hit hard today, with YNDX stock in the red to the tune of 8%. That tumble brings the December-to-date loss to 28%, and the year-to-date loss to 58%.
The spark for Monday’s tumble from YNDX stock wasn’t specific to the company. Rather, it can be attributed to the continued decline in the value of the ruble, as well as an analysis posted by Russia’s central bank governors today. The report noted that with oil sustained at a price of only $60 per barrel, Russia’s GDP would likely shrink by 4.5% or more, with consumer spending poised to contract at least 6.3%.
It didn’t take long for YNDX shareholders — who were already worried — to conclude that weakened consumer spending means less interest in cruising the internet for goods and services to buy.
Linn Energy LLC (LINE)
Crude oil’s ongoing implosion continues to batter energy stocks, with Linn Energy being today’s favorite proverbial punching bag. Crude oil slumped more than 4%, reaching yet another multi-year record low of around $55.30 per barrel. LINE stock followed that lead, and then some, losing nearly 18% of its value on Monday and also hitting new multi-year lows.
That said, and though the company has said nothing in this capacity, two separate commentaries posted regarding Linn Energy LLC have both suggested the highly-debt-reliant company is going to be forced to cut production, and with one of those articles suggesting the company’s dividend payout is subsequently going to shrink. And, with LINE stock currently yielding a whopping 22% on a trailing basis, that doesn’t seem like an implausible possibility.
ISIS Pharmaceuticals (ISIS)
Last but not least, ISIS Pharmaceuticals shares were punched today, though its only crime was being too good for its own good.
Between late May and last week, ISIS stock had rallied an amazing 38% in anticipation of encouraging news regarding its spinal muscular-atrophy drug SMNRx, in addition to progress with its thrombosis therapy.
Investors haven’t been disappointed either, with positive results from the thrombosis drug study being unveiled last week. ISIS stock hit multi-month highs two days later in the wake of the announcement.
There’s only so much good news a stock’s price can pack in, however, and ISIS Pharmaceuticals shares seem to have reached that limit — and then some.
Feeling the weight from all the recent gains, shareholders simply decided the recent runup was an “as good as it gets for a while” scenario, and began taking profits. ISIS stock tumbled more than 8% on Monday, but there’s still room for the pharmaceutical stock to continue falling.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
