Another horrifying plunge from the Chinese market on Thursday morning set up another nasty plunge from U.S. stocks as well. Thanks to the 2.37% stumble from the S&P 500 today, the index now stands at 1943.09… its lowest level since early October.
Leading the bearish charge were Las Vegas Sands Corp. (NYSE:LVS), Vale SA (NYSE:VALE) and Freeport-McMoRan Inc (NYSE:FCX). Here’s what investors need to know about each name.
Las Vegas Sands Corp. (LVS)
Just when it looked like a glimmer of hope was starting to shine for Las Vegas Sands, along comes something to pull the rug out from underneath LVS shares.
Despite the name, Las Vegas Sands isn’t just a play on the iconic gambling Mecca located right in the middle of Nevada anymore. The casino has a presence elsewhere, including China’s gambling enclave Macau. The crackdown on Macau’s nefarious dealings has taken a toll on the casino operators in the region — including LVS — but with the one-year mark of stricter and strictly-enforced rules just around the corner, investors were once again looking for year-over-year growth.
Perhaps they were too optimistic too soon.
While regulatory reform may mostly be in the rearview mirror, the threat of economic implosion in China presents a whole new set of potential problems for Macau casino owners.
LVS ended the day down 9%.
Vale SA (VALE)
Don’t misunderstand. Lingering extreme weakness in steel prices are a huge problem for Brazilian steel company Vale SA. It wasn’t the crux of the reason VALE shares fell nearly 7% on Thursday, however. No, another round of weakness in Brazil’s currency, the real, once again spooked investors out of any company based in the fiscally struggling country.
That said, China is ultimately the cause of Vale’s weakness today too. China is one of Brazil’s biggest trade partners, and if today’s ugly meltdown of the Chinese market (the nation halted trading today for the second time this week to halt an avalanche of mounting losses) is any indication of brewing economic weakness there, Brazil is going to be in a similar amount of trouble.
Freeport-McMoRan Inc (FCX)
Finally, Freeport-McMoRan slipped deep into the red on Thursday, not just because of potential weakness in China and not just because of perpetually miserably commodity prices, but for an old-fashioned reason as well… FCX was on the receiving end of a potential downgrade.
TheStreet.com‘s Carleton English did the deed, reminding investors that bond-rating agency Moody’s was reviewing the oil, gas, and mining giant’s unsecured debt as a precursor to a possible downgrade. Presently at a rating of Baa3, any downgrade would push those bonds to junk status.
Mining companies (and oil and gas companies in particular) are already struggling to squeeze out a profit between the cost of capital and the stunningly low price of oil. A weaker credit rating would raise the company’s cost of future debt, making it even more difficult for Freeport-McMoRan to turn a profit.
FCX fell 9% following the wake-up call.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
