Lackluster retail sales growth along with similarly lackluster industrial productivity last month didn’t deter the bulls on Tuesday.
In fact, it seems to have inspired them, suggesting Tuesday’s economic news abated the risk of an interest rate hike on Thursday. When all was said and done, the S&P 500 finished the day up 1.28%, closing at 1978.09.
It wasn’t a banner day for XenoPort, Inc. (NASDAQ:XNPT), Sonic Corporation (NASDAQ:SONC) and Vale SA (ADR) (NYSE:VALE), however.
Here’s whey each skipped out on the market’s broad rally.
Vale SA (ADR) (VALE)
The fact that Brazil’s economy and currency — and by extension, Brazilian iron ore name Vale — is in trouble isn’t exactly a big secret. But when the media makes a point of reiterating that reality, it can still have an ill effect on the stock.
That’s what drove VALE shares lower on Tuesday, as not one but two different commentaries served to underscore the recent credit-rating downgrade of the country and the recent tumble from the nation’s currency, the real, to new multiyear lows.
The first of this pair of alarming write-ups came from Forbes contributor Kenneth Rapoza, who pointed out that all aspects of the financially-struggling nation were a question mark.
The more damaging of the two pieces in question, however, was a string of pessimistic outlooks on the country gathered and published by Barron’s.
Perhaps Capital Economics analyst Adam Collins summed it up best by noting:
“The latest raft of fiscal austerity measures announced by Brazil’s government are clearly aimed at stabilising financial markets following last week’s downgrade by S&P, but in practice are unlikely to do much to restore the public finances to health. … there is good reason to expect actual budget savings to fall well short of government projections. We expect a large primary deficit this year (about 1% of GDP) and a small primary deficit next year (about 0.3%). In these circumstances, the public debt-to-GDP ratio will rise further – and further downgrades seem likely.”
VALE closed 3.8% lower for the day.
XenoPort, Inc. (XNPT)
Shares of biopharma company XenoPort had the dubious honor of being the worst of the worst performers on Tuesday. When all was said and done, XNPT finished the session down to the tune of 28%.
At the heart of the tumble from XNPT was news that psoriasis drug XP23829, though effective, also often created significant side effects that would make it largely unusable. Namely, XP23829 can too often cause nausea, abdominal pain and vomiting.
Fierce Biotech‘s John Carroll summed up the fierce intraday reversal into a sharply lower close:
“…it faces a crowded set of late-stage rivals with a drug that posted some troubling side effects, if it can make it through Phase III. And investors swiftly turned from upbeat to doubtful this morning as they had a chance to ponder the results.”
Sonic Corporation (SONC)
Last but not least, by most accounts, quick-service restaurant Sonic Corporation shares should be higher. The company reported same-store sales growth of 4.9% for the fourth quarter, topping off same-store sales growth of 7.3% for the full year.
And yet, SONC shares ended Tuesday down more than 8%.
What gives?
Though up 4.9% for Q4, the market was expecting same-store sales growth of 5.3% for the recently-completed quarter. Traders took that ball and proverbially ran with it.
Not everyone is scurrying out of Sonic, however. UBS upgraded SONC from a “sell” to a “neutral,” suggesting the previously seen downside has been priced in by Thursday’s pullback.
Still, UBS is maintaining its target price of $30 on Sonic shares.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
