Having had a long weekend to think about it, and perhaps deflated by May’s confirmed decline in factory orders, Last week’s bullishness gave way to profit taking today. The S&P 500 closed at 2088.55 on Tuesday, down 0.68%.
Leading the bearish charge on Tuesday were Freeport-McMoRan Inc (NYSE:FCX), Harley-Davidson Inc (NYSE:HOG) and Lloyds Banking Group PLC (ADR) (NYSE:LYG). Here’s a closer look at why each was up-ended.
Freeport-McMoRan Inc (FCX)
The commodity meltdown of 2014 and 2015 was rough on all the names in the basic materials and energy sector, but it was absolutely brutal for Freeport-McMoRan.
Its highly levered diversified stakes in the energy as well as the copper market proved to be a liability more than an asset, sending FCX down from a high of $39 in 2014 to a low of $3.52 in January of this year. The move back above $10 in the meantime suggested a recovery was in the works, but investors were reminded again today that these names aren’t out of the woods yet.
Part of that reminder — and subsequent 7% setback for FCX — was prompted by crude oil’s 5% setback on Tuesday. Another prod, however, may have been this Motley Fool take suggesting that the debt-laden company’s only path to survival is one that requires more asset sales, undermining the company’s capacity to generate revenue.
Harley-Davidson Inc (HOG)
It looks like the rumored acquisition of Harley-Davidson was nothing more than that after all … just a rumor. The company confirmed it today, sending HOG down a whopping 10% as a result.
KKR & Co. L.P. (NYSE:KKR) was pegged as the potential buyer, with market news website (often unvetted news) The Fly getting the bulk of the credit for putting the rumor in motion. And, there’s a certain logic to such a deal. RW Baird downgraded HOG all the same today, however, finding no actual evidence that a deal was in the works.
Still, even with the pullback, HOG shares are up 6% since the rumor first took the stock 20% higher when it was first floated on Friday.
Lloyds Banking Group PLC (ADR) (LYG)
Last but not least, the pain for Britain’s biggest banks in the wake of the Brexit vote isn’t over yet either. Already down 31% since the country opted to leave the European Union, Lloyds Banking Group shares fell another 7.7% today after analysts with U.K. brokerage firm The Share Centre opined that LYG and its peers would indeed be apt to lower their dividend payouts.
Based on their modeling, Lloyds and other big British banks are projected to sport a coverage ratio of 1.0 going forward for the foreseeable future.
The pullback from LYG took shape even against a backdrop of good news that the Bank of England — Britain’s version of the Federal Reserve — was going to ease up on its capital requirements in an effort to soften the blow of the Brexit.
The Royal Bank of Scotland Group PLC (NYSE:RBS) and Barclays PLC (ADR) (NYSE:BCS) were down similarly today, for the same reason.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
