It wasn’t the most impressive start to the trading day, but once investors had time to fully digest Monday evening’s presidential debate as well as an impressive consumer confidence report for September, traders got in a buying mood. The S&P 500 ended the session at 2159.93, up 0.64%.
It wasn’t a banner day for every name, however. Chesapeake Energy Corporation (NYSE:CHK), J M Smucker Co (NYSE:SJM) and Freeport-McMoRan Inc (NYSE:FCX) each ended Tuesday more than a little bit in the red.
Here’s what happened.
Freeport-McMoRan Inc (FCX)
Tuesday may have been a solidly bullish day for most stocks, but Freeport-McMoRan and many of its industry peers slipped deep into the red on Tuesday, as it was a miserable trading session for basic materials.
Crude oil ended the day down 3.2%. Silver was off 2%. More industrial materials like copper and aluminum also struggled, working against the value of FCX.
Goldman Sachs was a big contributor to the stumbling block oil tripped over. The investment bank lowered its Q4 price forecast by $7 per barrel, mostly driven by the ongoing supply glut. Gold’s weakness was driven more in response to Monday evening’s Presidential debate. To the extent it could be ferreted out from each candidate’s comments, investors now foresee an environment that doesn’t necessitate a need for gold as a hedge. That headwind affected FCX as well, dragging it down 2.8%.
It’s not a mindset traders have adhered to, though, so don’t be surprised if Freeport-McMoRan and other players in the materials space reverse course soon.
J M Smucker Co (SJM)
Investors already knew J M Smucker wasn’t doing particularly well with the pet food business it got into last year via the $3.2 billion purchase of Big Heart Pet Brands. The extent of that struggle may not have been fully appreciated by shareholders until today, however, when they sent SJM stock 3% lower on the heels of a downgrade by Credit Suisse.
In short, Credit Suisse lowered its stance on SJM from “Outperform” to “Neutral,” simultaneously lowering its price target for SJM from $158 to $145. The firm’s analyst noted “… we underestimated the hit to sales from difficult comparisons to last year’s extensive new product launches and we fear that we underestimated the level of reinvestment it will take to revitalize the struggling pet food division.”
Fanning those bearish flames was a comment from Jim Cramer, pointing out J M Smucker is fighting a price war with every product it sells.
Chesapeake Energy Corporation (CHK)
Finally, as if the headwind that worked against oil and gas names on Tuesday wasn’t enough, Chesapeake Energy was hit doubly hard as reports of Carl Icahn’s waning interest in the company surfaced.
In short, at least part of the reason some CHK investors were holding out hope for the company stemmed from an assumption that activist investor and major Chesapeake shareholder Carl Icahn was planning to work some of his magic on the struggling company.
Now his interest isn’t a clear. Icahn’s designated board members Vincent Intrieri and John Lipinski both resigned on Monday, suggesting Icahn was no longer interested in trying to rekindle the company’s value. Supporting that idea is the fact that just last week Icahn reported he has sold about half of his CHK shares.
CHK fell 6% in response to the investor’s abdication.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
