The bulls did their best to fend off a bear attack on Tuesday, but by the time the closing bell was within sight, it was a losing battle. The S&P 500 closed at 1979.26 today, down 1.12% for the day thanks to a last-minute wave of selling.
It was even worse for owners of Vale SA (ADR) (NYSE:VALE), Micron Technology, Inc. (NASDAQ:MU) and Devon Energy Corp (NYSE:DVN), though.
Here’s why.
Vale SA (ADR) (VALE)
Just one day following a record-breaking surge in steel prices, the commodity is slumping and taking the Brazilian iron ore company Vale SA with it.
VALE owners can primarily blame Goldman Sachs for the 14% selloff from Vale today. After China pledged to drive economic growth of between 6.5% and 7.0% this year regardless of the long-term cost and lit a fire under commodities, that would assuredly be in demand as a result, Goldman — among others — countered by saying the supply was ample, and weak margins would keep prices subdued. Goldman Sachs expects iron ore prices to slide back from their current price near $60 to $35 sometime this year.
Fanning the bearish flames for VALE was lingering concern that it would go ahead and pull the trigger on its option to acquire 15% of Australian peer and rival Fortescue Metals Group Limited (ASX:FMG). While such a deal would diversify the company’s revenue sources, all deals that incur a cash cost are going to be on the receiving end of pushback.
Devon Energy Corp (DVN)
Steel prices weren’t the only commodity to be up-ended on Tuesday and send a related stock lower as a result. Oil prices peeled back more than 3%, and sent energy stocks lower as a result. Leading the pack was Devon Energy, with an 11% tumble.
Even so, while oil prices and oil stocks took one on the chin today, crude prices are still up 26% from their February low, and were deserving of a break. There’s also still chatter that oil prices have already made their bottom. As Standard & Poor’s head of commodities Jodie Gunzberg recently noted:
“There’s two things … that show us that it could have bottomed … The energy stocks are outperforming the energy bonds by the most since October, and that shows a lot of optimism in the market. The other one is we saw a historically big runup in oil of 15 percent in three days last month. That has an additional 20 percent return.”
Micron Technology, Inc. (MU)
Finally, for a second day in a row, Micron Technology earned a spot on the daily “Worst 3” list. It earned this spot for the same reason each day — the downgrade of MU inspired by concerns that DRAM memory prices will remain pressured for the foreseeable future.
Nomura did the deed, cutting its opinion on Micron Technology from a “Neutral” to “Reduce” rating while simultaneously lowering its target price for MU from $12 to $8. Nomura remains concerned that DRAM supply remains plentiful, working against prices.
The concern pushed MU stock down 2% on Monday, but the downgrade took hold in a much bigger way today, sending Micron Technology shares down nearly 8%.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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