Stunned by news that the Swiss franc was being unpegged from the euro, Wall Street logged another day relatively deep in red ink. All told, the S&P 500 dropped 0.92% on Thursday.
The decision to unhook the value of the franc with the euro led to an immediate 30% jump in the franc’s value, and a sizable pullback in the value of the euro, which in turn led to even further strength of the U.S. dollar.
Domestic investors, already concerned about an expensive sawbuck making life difficult for U.S. companies that sell goods to foreign customers, have now become downright worried U.S.-made goods simply won’t be marketable overseas for much longer.
In any case, the D.R. Horton, Inc. (DHI), BlackBerry Ltd (BBRY) and Best Buy Co Inc. (BBY) were the worst of the worst on Thursday, though — surprisingly– a strong U.S. dollar wasn’t the catalyst for any of their pullbacks.
Best Buy (BBY)
The good news is, Best Buy drove a 2.6% increase in sales during 2014’s important holiday-shopping season. The bad news is, Best Buy believes the first half of this year could be tough … real tough. The electronics retailer expects flat or slightly negative same-store sales growth through the first couple quarters of 2015 (fiscal 2016), with operating income projected to fall between 30 and 50 basis points.
There’s an understandable reason for the anticipated shrinking of operating margins. CEO Hubert Joly stated:
“…[w]e are already beginning to make the incremental investments in the growth initiatives … which will put year-over-year pressure on our non-GAAP operating income rate beginning as early as Q1 FY16.”
Investors weren’t impressed, however, as BBY stock plunged 14% following the announcement.
BlackBerry (BBRY)
Looks like BlackBerry isn’t going to be acquired by Samsung after all — and, according to the company, that option was never even on the table.
Wednesday’s buzz on Wall Street was that Canadian smartphone maker BlackBerry was being eyed by competitor Samsung, sending BBRY stock up almost 30% that day. BlackBerry quickly nipped the rumor — and the rally — in the bud by flatly denying it has discussed a takeover by Samsung.
Disappointed investors pulled BBRY stock down nearly 20%, though it’s worth noting BlackBerry shares are still trading above where they were valued before the rumor mill started to spin on Wednesday morning.
D.R. Horton (DHI)
While shares of homebuilder D.R. Horton were the biggest loser among homebuilding stocks today, it was mostly a victim of its competitors’ recent bad news. KB Home (KBH) and Lennar Corporation (LEN) both warned that margins could weaken in the foreseeable future.
KB Home now doesn’t expect to reach its margin goal of 20% in 2015, while Lennar has lowered its full-year gross margin forecast from last year’s 25.4% to 24%. Both companies cited buyer incentives as one of the reasons profits would contract this year.
Presuming D.R. Horton is hitting the same headwind, investors sent DHI stock down nearly 8% on Thursday.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
