Between reports of modest personal spending in December and an ISM index that’s fallen below the critical 50 level, the market understandably got started on a bearish note this morning. The ending, however, wasn’t quite so bad. The S&P 500 finished the day at 1939.36, down a mere 0.05%.
Nevertheless, Monday was a rough session for some names, including Nokia Corporation (NYSE:NOK), ICICI Bank Ltd (NYSE:IBN) and Kinder Morgan Inc. (NYSE:KMI). Here’s what went wrong for these three stocks.
Nokia Corporation (NOK)
The good news is, arbitrators sided with Nokia Corporation in a patent dispute with Samsung (OTCMKTS:SSNLF). The bad news is, the dollar amount awarded was considerably less than many NOK shareholders were expecting.
All told, Nokia Technologies — a division of Nokia Corp. — is expected to generate €800 million per year thanks to the patent award. The market, however, was expecting something closer to an annualized rate of €1.2 billion.
The disappointing news was enough for Merrill Lynch to downgrade NOK from a “Buy” to a “Neutral” opinion. The research arm of the brokerage firm said:
“We believe with a major potential catalyst having disappointed, the stock is now less likely to outperform this year. Growth in the high-margin Technologies division was meant to be a major driver of earnings/EBIT and in our view has helped the stock trade at a material premium to Ericsson. We now believe that the risk is that this premium narrows as investors may feel less confident in Nokia achieving EPS of ~E0.6 by 2018. We hence lower our recommendation from Buy to Neutral and we will review our model.”
In step with the steep selloff from Nokia shares, Alcatel Lucent SA (NYSE:ALU) tumbled the same 12% NOK did. The two telecom giants are merging within the next few weeks, and in that the deal is effectively a stock swap, what’s bad for Nokia is just as bad for ALU.
Kinder Morgan Inc. (KMI)
For a while it looked like Kinder Morgan shares have finally found a bottom, pivoting upward on the heels of a strong reversal bar from January 20th. Between today’s plunge in the price of oil and was likely to be an ill-advised acquisition of more than a dozen refined oil terminals, though, investors sent KMI shares nearly 8% lower.
The acquisition in question is Kinder Morgan’s share of a joint venture with BP plc (NYSE:BP). Costing KMI $350 million, investors are understandably concerned it could just be a new way for the company to lose money.
Fanning the bearish flames on Monday was the 6% dip in crude oil prices. Between economic malaise in China and no end in sight to strong oil production numbers from OPEC, the glut is still very much in place.
ICICI Bank Ltd (IBN)
Last but not least, picking up where they left off last week after a disappointing quarterly report, shareholders sent ICICI Bank shares down another 3.5% today.
India’s largest lender reported its most me make profit-growth in six years last quarter, largely thanks to the surprise jump in bad loans. Provisions for loan losses nearly tripled from year-ago levels, to 28.4 billion rupees.
The degree of loan losses and the number of bad loans maybe someone artificially inflated by the Reserve Bank of India’s efforts to get the country’s banks’ balance sheets more accurately indicating loans that have gone bad in a way that had not been expected all required in the past. The raised standards may also be a big part of the reason IBN shares have been nearly cut in half since the beginning of 2015.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
