The first day back from a long weekend wasn’t an especially memorable one. The disappointing ISM Services Index reading for August was still above the key 50 mark, and a lack of earnings news kept most traders disinterested. By the time Tuesday’s closing bell rang, the S&P 500 Index was at 2186.48, up a mere 0.3%.
A modest gain would have been perceived is a big victory, however, compared to the results Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP), Lloyds Banking Group PLC (NYSE:LYG) and Cummins Inc. (NYSE:CMI) dished out today.
Here’s why each was oddly deep in the red.
Cummins Inc. (CMI)
With just a quick glance, it’s tough to pin down exactly why Cummins shares lost 7.3% of their value today. A few pokes around the automotive industry’s headlines on Tuesday, though, and the reason pops up.
CMI plunged today on the heels of news that Volkswagen AG (ADR) (OTCMKTS:VLKAY) was buying a 17% stake in heavy truck maker Navistar International Corp (NYSE:NAV).
Although the impact the investment may have on Navistar’s business decision wasn’t offered with the news, most concluded that Volkswagen would supply the engines that power Navistar’s trucks, encroaching on Cummins’ turf.
As Stifel’s Michael Baudendistel and Brady Cox commented:
“We view the reports as being potentially negative for Cummins since, at least based on reports we are aware of so far, Volkswagen plans to supply Navistar with engines. Third-party engine manufacturers have not been major players historically in the commercial vehicle manufacturing industry in Europe, as they have historically in North America … YTD in 2016, 73% of Navistar Class 8 trucks used a Cummins engine.”
Lloyds Banking Group PLC (LYG)
It looked as if the worst of the impact of the Brexit vote was over for big U.K.-based banks like Royal Bank of Scotland Group PLC (NYSE:RBS) and Lloyds Banking Group.
As it turns out, the bears weren’t quite done with LYG and RBS yet. Deutsche Bank downgraded both bank stocks today, noting lower growth and higher costs were on the horizon now that interest rates were poised to remain painfully low for some time.
Analyst David Lock downgraded RBS from a “hold” to a “sell,” pushing it lower by nearly 4%. LYG was downgraded from a “buy” to a “hold,” forcing it down to the tune of 4% as well.
Ctrip.com International, Ltd. (CTRP)
Last but not least, Chinese online travel-booking company Ctrip.com International fell 4.3% today after the company announced it would be issuing new notes convertible to CTRP shares.
All told, Ctrip.com International intends to sell $750 million worth of convertible securities, and at the same time announced it would be issuing 22.5 million shares of CTRP. Both offers allow for additional issuances if they’re over-allotted. The uses of the funds wasn’t specified beyond general corporate purposes, which may include investing on other companies or assets.
For perspective, Ctrip.com International is a $21 billion company with a float of 342 million shares. The fund-raising presents a fair amount of potential dilution.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
