Between disappointing retail sales last month and a distinct lack of inflation in February when a little inflation would have been a signal of economic strength, the recent buyers were content to let the bears have the day. Even so, the sellers could only push the S&P 500 lower by 0.18% to a close of 2,015.93. The index is still above some key support levels.
Not every name escaped Tuesday mostly unscathed, though. Freeport-McMoRan Inc (NYSE:FCX), Best Buy Co Inc (NYSE:BBY) and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) all used more than their far share of red ink.
Here’s what traders need to know.
Valeant Pharmaceuticals Intl Inc (VRX)
In retrospect, it can’t be terribly surprising Valeant Pharmaceuticals was completely thrashed, with VRX shares falling 51% on Tuesday, translating into an 87% pullback since August. The company was skating on thin ice even before the now-infamous September 21st tweet from Presidential hopeful Hillary Clinton, racking up a mountain of debt by making a string of ill-advised acquisitions. The rooster has simply come home to roost now that the inevitable self-implosion of soaring drug prices has taken hold.
The news: With its overestimated drug-sales potential already under attack from multiple angles (political and social, mostly), Valeant warned today that a default on its $30 billion in debt is a very real possibility. The company also cut its original 2016 sales and earnings projections.
Activist investor and major VRX shareholder Bill Ackman notified shareholders he’d be taking a more active role in the company’s operation, saying:
“We continue to believe that the value of the underlying business franchises that comprise Valeant are worth multiples of the current market price … Getting to those values, however, will require restoration of shareholder confidence in the management and governance of the company.”
The irony is, Ackman was the primary driver behind the company’s debt-driven buying spree.
Freeport-McMoRan Inc (FCX)
Don’t look for a company-specific reason Freeport-McMoRan shares were down 7% today; you won’t find one. That said, it’s not tough to figure out the reason for the demise of FCX on Tuesday … between the steep selloff from most commodities today, in addition to news that the company has been forced to start selling assets to raise much-needed cash, it doesn’t take much to tip FCX over these days.
As for the commodities specific to Freeport-McMoRan, copper was down a bit, while gold and oil prices were down 1% and 2% respectively.
Best Buy Co Inc (BBY)
Last but not least, Best Buy shares fell nearly 5% today mostly on news that a key director would be stepping down, but at least partially because February’s retail sales were lackluster.
It’s not just any member of the Board of Directors. It’s Brad Anderson, who happens to be the former CEO of Best Buy, and as such he was able to make a decided contribution in terms of guidance. The exit was amicable and voluntary. He’ll be replaced at the end of his term, in mid-June.
Also working against BBY shares on Tuesday was a disappointing retail spending report for last month. Retail sales fell 0.1% in February, and worse, January’s sales growth of 0.2% was revised to a drop of 0.4% instead.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
