The bulls may have taken charge yesterday, pushing the market above some key resistance and into new-high territory. Those buyers struggled to follow-through today, however, with the tepid rally effort fading mid-day, leading to what essentially amounts to a breakeven. The S&P 500‘s close of 2082.78 was only 0.02% better than Wednesday’s close.
For Barrick Gold Corporation (USA) (NYSE:ABX), Seagate Technology PLC (NASDAQ:STX) and Vale SA (ADR) (NYSE:VALE) shareholders, though, a breakeven would have been more than palatable on Thursday. These three names lost a lot of ground, albeit for understandable reasons.
Here’s what happened.
Barrick Gold Corporation (USA) (ABX)
Barrick Gold lost nearly 4% of its value today, leading the bearish charge among large-cap gold mining stocks.
The direct prod for the pullback was a tumble in the price of gold itself. Gold futures fell 1.7% today, but are now down 2.4% for the past three trading days, suggesting gold may not resume the February and March rally with ease after all.
The indirect but bigger reason gold miners like Barrick and gold itself lost so much ground on Thursday, however, is the fact that inflation remains well contained. The Labor Department reported a mere 0.1% increase in consumer costs for March, and they were only up 0.9% on a year-over-year basis.
One of the key tenets of owning gold is as a hedge against inflation. If there is no inflation, there’s no need to hold gold or the companies that mine it.
Seagate Technology PLC (STX)
For the second day in a row disk-drive maker earned a spot on the “Worst 3” list, but in retrospect, yesterday’s weakness was just a warm up for today’s drubbing. On Thursday, STX lost a whopping 20% of its value.
As a refresher, Wednesday’s 3% lull from STX was mostly the result of a downgrade by Deutsche Bank. Long story made short, analyst Sherri Scribner believes Seagate Technology PLC is simply missing the boat.
Today’s news suggests Scribner may have been right. The company warned STX owners after yesterday’s close that its fiscal Q3 results would fall short of expectations. The new expectation for revenue of $2.6 billion wasn’t leaps and bounds below the average estimate of $2.7 billion. But, between the uninspiring messages the company added to its outlook and the fact that it has already been such a disappointment, it didn’t take much to up-end the stock.
Vale SA (VALE)
Last but not least, Brazilian iron ore supplier Vale is also no stranger to the daily “Worst 3” list, but it hasn’t been a regular since late last year after some semblance of hope started to emerge a few weeks ago. Maybe the market shouldn’t have gotten its hopes up quite so much on VALE after all.
The backdrop was encouraging enough. Brazilian stocks as a whole broke above a key technical ceiling this week, and though it’s ugly, this week’s impeachment decision was presumed by some to be a catalyst for closure and capitulation of what’s been a draining economic saga.
As it turns out, however, Vale may not be out of the woods yet. Credit Agricole downgraded the stock from “Underperform” to an outright “Sell” today, pulling the rug out from underneath the fragile name.
VALE closed 7% lower on Thursday.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
