The Federal Reserve is content to hold off on any more rate hikes until all the Brexit dust settles, according to the minutes from its late June meeting. Between that and a higher-than-expected ISM Services Index score for June, the bulls were willing to turn what started out as a bearish day into a bullish one. The S&P 500‘s close of 2099.73 was 0.54% better than Tuesday’s close.
It wasn’t a winning day for all stocks though. American Airlines Group Inc (NASDAQ:AAL), Lloyds Banking Group PLC (NYSE:LYG) and Netflix, Inc. (NASDAQ:NFLX) each used more than their fair share of red ink.
Here’s why each was up-ended.
American Airlines Group Inc (AAL)
American Airlines Group was the victim of a downgrade today, ending the session off by 2%.
Credit Suisse did the deed, lowering its opinion of AAL shares from “outperform” to “underperform” on assumptions that passenger revenue per available seat per mile was in no position to rebound anytime soon. Credit Suisse analyst Julie Yates wrote:
“Until unit revenues show firm evidence of improvement, which requires capacity discipline or a macro reacceleration, the disillusion with owning airlines will persist, with rallies limited to those led by risk-on appetites instead of improving fundamentals.”
Credit Suisse also downgraded United Continental Holdings Inc (NYSE:UAL) for the same reason, sending it to a loss similar to the one AAL booked today.
Lloyds Banking Group PLC (ADR) (LYG)
For the second day in a row, Lloyds Banking Group PLC (ADR) (LYG) dished out the most misery to most investors, losing 7% of its value. With Wednesday’s stumble, LYG shares are now down a jaw-dropping 41% since Britain voted two weeks ago to leave the European Union.
The crux of today’s setback for LYG was news that as of Tuesday, asset managers had stopped withdrawals from real estate-based funds in an effort to quell what some would suggest is becoming an unmanageable outflow.
While the freeze doesn’t work directly against LYG, indirectly it sends an alarming message about the broad real estate market, which could crimp Lloyds Banking Group’s real estate lending business.
Peers and rivals Royal Bank of Scotland Group PLC (NYSE:RBS) and Barclays PLC (ADR) (NYSE:BCS) also lost more than their fair share of ground on Wednesday on the heels of the news.
Netflix, Inc. (NFLX)
Netflix isn’t quite all most investors seem to think it is, according to Jefferies analyst John Janedis. He downgraded NFLX from “hold” to “underperform” on Wednesday, simultaneously lowering his target price on NFLX shares from $120 to $80.
The big target reduction mostly stems from concerns that the on-demand video service’s U.S. subscriber growth was going to slow down much sooner and much more dramatically than most investors seem to believe. Janedis cited ODV competition as well as a slow-down in the growth of the number of consumers with broadband access as the core reasons for the downgrade.
Janedis also chimed in with a less-than-thrilling (although still net-positive view) of the company’s international opportunity, underscoring a similar downgrade rationale from Needham posted on Tuesday. Once again, fallout from the Brexit decision was a factor.
NFLX closed 3.4% lower on Wednesday.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
