Though most trading is mentally on hold until this Thursday’s interest rate decision from the Federal Reserve is posted, last Thursday’s and Friday’s gains were strong enough for traders to sell into that strength today. The S&P 500 closed at 1953.03, down 0.41%.
It was considerably worse for those who own Alcoa Inc (NYSE:AA), Sunedison Inc (NYSE:SUNE) and Alibaba Group Holding Ltd (NYSE:BABA), however. These three names ended the day much deeper in the red.
Here’s why.
Alibaba Group Holding Ltd (BABA)
For those who even keep loose tabs on the pulse of the market, it would have been tough to not get a grasp on why Alibaba Group Holding shares ranked among the worst of the worst on Monday.
On the off chance you’ve not heard, though, an article posted at Barron’s this weekend suggested BABA could lose 50% of its current value once a bevy of problems and concerns had time to sink in.
The article, penned by Jonathan Laing, pointed out that BABA stock was priced at about 25 times its forward-looking earnings estimates, which compared less than favorably to its peer and competitor eBay Inc. (NASDAQ:EBAY), which was valued at only 15 times its projected earnings for next year at the time.
The company responded to the pessimistic point of view, as did fan and supporter Bob Peck of SunTrust, both of whom accused Laing of not fully understanding the nature of Alibaba Group Holding’s business and opportunity.
But the counterarguments fell on deaf ears — BABA finished the day down more than 3%.
Alcoa Inc (AA)
Looks like the commodity rout hasn’t quite run its course yet, with the recent rebound effort from Alcoa being further quelled today after the company announced it would be halting production at its refinery in Suriname.
Alcoa Global Primary Products’ President Bob Wilt simply explained:
“Suralco’s ongoing energy challenges and limited bauxite supply, combined with unfavorable market conditions, mean it is no longer possible to continue operations.”
The decision is expected to cost Alcoa between $65 million and $75 million in the second half of this year, or between five and six cents per share of AA, mostly in noncash costs.
The news sent the stock down nearly 3%.
Sunedison Inc (SUNE)
In late August, it finally looked like SunEdison was headed higher. Shares rallied more than 60% off their lows, yet were so sharply oversold in July and early August that there was still plenty of room to keep rolling.
Now, however, the bounce effort from SUNE is faltering, with today’s 6% drubbing pulling the stock down nearly 20% from last week’s high.
The selloff was jump-started by last week’s news that SunEdison was buying a sizable stake in a project co-developed by Dominion Resources, Inc. (NYSE:D). Although it is a fruitful acquisition, investors are understandably starting to worry that SUNE will never actually become a profitable stock.
The bearish flames were further fanned Friday when 24/7 Wall St. pointed out that SunEdison was on the receiving end of a short-selling/bear attack. The raid may or may not matter in the end, but for now, it was enough to keep the stock on its heels.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
