While Tuesday’s trading started out on a hopeful foot for stocks, it certainly didn’t end that way. The S&P 500 fell 0.50%, ending the session at 2150.49, and falling below a key support level in the process.
Leading the bearish charge were Dollar Tree, Inc. (NASDAQ:DLTR), Dr Pepper Snapple Group Inc. (NYSE:DPS) and Silver Wheaton Corp. (USA) (NYSE:SLW) Here’s why each lost more than their fair share of ground today.
Silver Wheaton Corp. (USA) (SLW)
As bad as things were for gold and gold miners like Barrick Gold Corporation (USA) (NYSE:ABX) and Newmont Mining Corp (NYSE:NEM) today, they were even worse for silver and its players.
Silver Wheaton was among the hardest hit, with SLW shares losing 10.3% of their value on the 5.1% plunge in the price of silver. Gold only fell 3.2%. Both fell for the same reason, however. That is, the prospects of higher interest rates prompted a modest improvement in the value of the U.S. dollar, which prompted a not-so-modest decline in the value of precious metals and corresponding stocks like SLW and ABX.
Federal Reserve Bank of Richmond President Jeffrey Lacker arguably got the ball rolling, suggesting the Fed Funds rate should already be at 1.5% and that the Fed should have been ratcheting it higher for some time now.
Dr Pepper Snapple Group Inc. (DPS)
Dr Pepper Snapple Group owners woke up to some mostly unexpected bad news on Tuesday. Bai Brands, which is partially owned by Dr Pepper Snapple, is mulling an outright sale of its entire business including the portion of it owned by DPS.
The impact the loss of Bai’s health-oriented drinks revenue might have on the value of DPS isn’t exactly clear. Bernstein says Bai’s absence could shave 100 basis points off the beverage company’s top line, while the brand has been driving at least half of the organization’s top line growth. The market was willing to assign a value to the potential downside a sale of Bai Brands would create, however — DPS ended the session 4.3% lower.
Dollar Tree, Inc. (DLTR)
Finally, already down 15% since mid-August, Dollar Tree shares lost 3.9% of their value on Tuesday in the wake of news that Cleveland Research had lowered its rating on DLTR from a “Buy” to “Neutral.” Cleveland Research noted higher-priced competition and strategic problems as the prompt for the downgrade of DLTR.
Wal-Mart Stores, Inc. (NYSE:WMT) is arguably the biggest headwind for Dollar Tree at this time.
Although the two discounters have always been competitors, the lower-end goods it sells didn’t necessarily compete head-on with the larger general merchandise department store chain. However, more recently, WMT has dramatically cut prices on some of its core goods, drawing some DLTR customers away.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
