With trading slowing down as another holiday weekend approaches, there just weren’t enough sellers today to muster a meaningful follow through on Wednesday’s weakness. The S&P 500‘s close of 2,249.26 was a mere 0.03% weaker than yesterday’s last trade.
Not every name escaped Thursday’s action unscathed though. Cempra Inc (NASDAQ:CEMP), Groupon Inc (NASDAQ:GRPN) and Bank of America Corp (NYSE:BAC) were all up-ended in pretty convincing fashion. Here’s a closer look at what went wrong for each.
Bank of America Corp (BAC)
Calling a spade a spade, Bank of America was an easy target to begin with today anyway. BAC shares were up 35% since the beginning of November as of yesterday’s close, and if nothing else, would-be profit-takers were getting antsy. They got the excuse they needed today in the form of a sizeable pullback in interest rates. Yields on 10-year Treasuries, for instance, slumped 3 basis points to 2.474%.
Higher interest rates means higher profit margins for lenders like BofA. BAC shares have rallied for nearly two months on the prospect of a rate hike this month as well as a handful more in the coming year. But, the rise in the market’s interest rates may have been a bit overbaked. Now that move is being at least partially corrected.
BAC ended the day down 1.5%.
Cempra Inc (CEMP)
As they say, if you live by the sword, you die by the sword.
All the rage in early 2015 thanks to a drug pipeline with strong prospects, Cempra shares were sent a stunning 57.4% lower on Thursday after the Food & Drug Administration told the company it can’t approve its pneumonia drug solithromycin until the agency has more information about its manufacturing facility. The FDA is also concerned about the way the drug’s safety, suggesting the sample size of the study was only about a tenth the size of the ideal number of participants.
The Food & Drug Administration’s so-called “complete response letter” doesn’t absolutely preclude the approval of solithromycin. It will, however, be difficult, time-consuming and expensive for Cempra to address all of the FDA’s concerns.
Groupon Inc (GRPN)
Finally, don’t look for a specific reason Groupon shares lost 4.9% of their value today — you won’t find one. Rather, take a step back and look at the bigger picture. The habitually unprofitable company is struggling to grow sales despite new leadership’s effort to overhaul the company, and investors are increasingly accepting the writing on the wall. Analysts currently rate Groupon just a little better than a “Hold”, which within the bullishly biased world of analysts may as well be a “Sell.”
The latest sandbag added to the mix that’s helping to drag GRPN down — hacking of user accounts to make unauthorized purchases.
With today’s 4.9% dip, GRPN shares have fallen 43% from their August high. Sheer momentum may also be playing a role in today’s weakness.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
