The bears may have picked up on Wednesday where they left off on Tuesday — in a selling mood — as news of China’s devaluation of the yuan continued percolate. But by the time the closing bell rang, the S&P 500 managed to gain 0.10% to close at 2,086.09.
Some stocks didn’t fare as well, though, including Alibaba Group Holding Ltd (NYSE:BABA), Macy’s, Inc. (NYSE:M) and Fiat Chrysler Automobiles NV (NYSE:FCAU). In fact, these three names largely led the bearish charge. Here’s why.
Alibaba Group Holding (BABA)
Alibaba Group Holding didn’t have a bad first fiscal quarter of 2016. It just didn’t live up to its revenue expectations. When you’re talking about a high-profile (and popular) stock like BABA though, it’s judged by analyst estimates rather than its actual growth.
When all was said and done, Alibaba earned 59 cents per share on $3.27 billion in revenue. The bottom line topped expectations for earnings of 56 cents per share of BABA, but the top line came up short of the expected $3.32 billion.
Sensing a looming slowdown, the market sent BABA shares down 5% by the close.
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Macy’s (M)
Upscale(ish) retailer Macy’s saw its stock drop 5% on Wednesday after the company posted disappointing second-quarter results and offered up equally disappointing guidance.
Last quarter, Macy’s earned 64 cents per share on $6.1 billion in revenue. Unfortunately, both of those figures missed estimates for a profit of 76 cents per share of M and a top line of $6.22 billion. Even worse, the numbers didn’t even keep pace with those seen the same quarter a year earlier, when profits rolled in at 80 cents per share of M stock and revenue totaled $6.27 billion.
The retailer also dialed back its full-year revenue guidance. Whereas it had been expecting a 1% increase in total sales, now it’s looking for a 1% decrease. Same-store sales are expected to be flat, rather than up 2% as previously expected. However, the company still believes it will produce a profit of $4.70 to $4.80 per share of M stock in 2015. Analysts collectively expect it to earn $4.63 per share this year.
Fiat Chrysler Automobiles (FCAU)
FCAU is appealing the ruling, but it’s unlikely the next court will feel any differently about the role Fiat Chrysler Automobiles played in the death of a child.
In 2012, Jeep Grand Cherokee passenger 4-year old Remington Walden died after the vehicle — with a rear-mounted gas tank — was struck and engulfed in flames. A Georgia court ruled that parent company Fiat Chrysler was indeed negligent with its design of the vehicle, and as such owed Remington’s family $150 million in damages. A Superior Court judge whittled the damages down to only $40 million, but still held that FCAU was negligent in its design and failure to correct the flaw.
With the ruling in place, the precedent of negligence poses a much more serious threat to Fiat Chrysler Automobiles. As many as 75 other passengers of the same vehicle have died in the same way.
FCAU fell 6% following the ruling.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
