In retrospect, Monday’s gains may have been an anomaly, as today stocks resumed the downtrend that started on Thursday of last week. Thanks to the S&P 500‘s loss of 0.87% and close of 2063.37, the index is back under some key technical lines in the sand, ending the session at the lowest close since mid-April.
Leading the bearish charge were Encana Corporation (USA) (NYSE:ECA), On Deck Capital Inc (NYSE:ONDK) and Vale SA (ADR) (NYSE:VALE). Here’s why each one was doomed from the start of Tuesday’s trading.
Encana Corporation (USA) (ECA)
Although the energy sector’s earliest Q1 results were mostly palatable and unsurprising, Encana broke from that trend by posting a much bigger than expected loss for its first quarter of 2016. All told, the company booked a loss of 15 cents per share, versus a profit of 3 cents per share in the first quarter of 2015, and worse than the expected loss of 12 cents per share.
Production of oil fell 11% on a year-over-year basis.
Encana’s management touted significant cost-cutting as well as improved execution with its quarterly results press release. ECA shareholders weren’t buying into the rhetoric though, in light of the stock’s 12% selloff on Tuesday.
On Deck Capital Inc (ONDK)
Leading Tuesday’s bearish charge among all listed stocks was online lending outfit On Deck Capital; ONDK dished out a stunning 33.8% tumble.
Not surprisingly, it was a disappointing earnings report that put the steep selloff in motion. In its first fiscal quarter of 2016, the company reported a loss of 18 cents per share on $62.6 million in revenue. The top line was up 11% on a year-over-year basis, but that figure fell short of guidance between $66 million and $69 million.
The loss also grew from the year-ago loss of 8 cents per share of ONDK … which was also the consensus estimate. Full-year revenue guidance was cut by $50 million.
The results and new guidance spurred a downgrade of ONDK by FBR & Co., which lowered its opinion from an “Outperform” to a “Market perform.” The analyst note accompanying the downgrade explained:
“We like ONDK’s business model, particularly its ability to partner with banks to provide lending as a service, but the near-term volatility in earnings and lack of profitability are concerns.”
Canaccord and Sterne Agee also lowered their stances on On Deck Capital. Canaccord lowered its target price on ONDK from $12 per share to $6.
Vale SA (ADR) (VALE)
Last but not least, Brazilian iron ore company Vale was wasn’t exactly on firm ground to begin with after reporting its Q1 numbers on Thursday of last week. Although income of $1.78 billion handily topped estimates of $1.06 billion, the failure of VALE shares to move any at all in the wake of the good news makes it clear the market wasn’t impressed.
As it turns out, traders were right to continue steering clear of Vale despite the light developing at the end of the tunnel. VALE shares tanked to the tune of 8% today, mostly in response to the 4.3% plunge iron ore prices suffered on the heels of reports that iron stockpiles in China had reached multi-month highs.
A sharp plunge in the value of Brazil’s currency, the real, fanned the bearish flames.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
