Despite finishing last week on a very bullish note, the bulls cowered once again when push came to shove. That is, the bulls moved to the brink of a breakout, but backpedaled before they could hit new-high territory.
When all was said and done, the S&P 500 finished the session at 2,105.33, down 0.51%.
It was much, much worse for owners of Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Etsy Inc. (NASDAQ:ETSY) and Noble Energy, Inc. (NYSE:NBL). Here’s why.
Vertex Pharmaceuticals (VRTX)
The buzz stemming from the notion that Vertex Pharmaceuticals could be an acquisition target hadn’t even died down yet before the FDA pulled the rug out from underneath VRTX shares.
At the heart of today’s 2.6% stumble from VRTX was its experimental cystic fibrosis treatment lumacafotor. Vertex Pharmaceuticals is trying it in conjunction with its existing CF drug Kalydeco as an improved therapy for the same disease. While the Food & Drug Administration isn’t displeased with the safety profile and efficacy of the drug combination, the FDA still isn’t certain the combo is any better than Kalydeco alone.
It’s a speed bump for VRTX, as much of the stock’s recent runup was predicated on the possibility that Vertex Pharmaceuticals was close to launching something even better than its existing solution.
Etsy (ETSY)
Shares of craft e-commerce company Etsy fell 8% today, bringing the post-IPO plunge to more than 30% in less than a month.
Monday’s leg of the selloff was born out of concerns that too many of the goods offered the site’s third-party sellers are counterfeit. Wedbush analyst Gil Luria explained:
“Sample of high risk listings indicates some violations may be 20x more likely on Etsy than eBay and even more likely than Alibaba’s Aliexpress …. Our research indicates as many as 2 million items on Etsy … may potentially be either counterfeit or constitute trademark or copyright infringement.”
While the possibility is an understandable cause for concern, the ease with which the allegation pulled Etsy lower only underscores a lukewarm opinion on the company to begin with. Both Goldman Sachs and Morgan Stanley are merely lukewarm on the company. Both investment banks hold a neutral opinions on the stock right now, and both feel ETSY is only worth $20 per share … well below the IPO price of $31.
Noble Energy (NBL)
Noble Energy was hardly the only oil and gas stock to tank on Monday. The entire energy sector was off 1.4% today, as crude oil prices slipped half a percent to end the day near $59.00 per barrel. NBL was the worst of the worst among the major oil names, however, losing 6% of its value.
The prod for its outsized weakness was likely linked to the announcement that Noble Energy will be acquiring rival Rosetta Resources — to the tune of $2.1 billion — in an all-stock deal. While pooling resources and culling overlapping costs is well worth considering during this period of tepid oil pricing power, the sizeable selloff from NBL says this particular deal (and perhaps its price tag) isn’t one investors are feeling good about.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
