ARWR, JCP, ADM – Wednesday’s Sliding Stocks

The stock market rallied in afternoon trading today, rebounding from a dismal showing Tuesday that sent stocks tumbling. Just yesterday Wall Street was fretting about a worldwide economic decline after the International Monetary Fund lowered its 2015 global growth projections from 4% to 3.8%. Today, the S&P 500 roared 1.7% higher as most sectors ended in the green, led by gains in utilities, financials and consumer services.

arwr jcp adm stock market todayWall Street has a short memory sometimes.

Encouraged by minutes from the most recent Federal Reserve policy meeting, which revealed a cautious tone on interest rate increases, equities rebounded. Arrowhead Research (ARWR), JCPenney (JCP) and Archer Daniels Midland (ADM) did not, however. Here’s why these stocks missed out on today’s big gains:

Arrowhead Research (ARWR)

Shares of Arrowhead Research are not for the faint of heart, and today showed exactly why. ARWR stock shed a whopping 43% after the small-cap biotech company released results from a phase II study.

Results, as you might imagine, were disappointing: its ARC-520 treatment for hepatitis B showed a 39% reduction of hep B’s surface antigen when taken in a one-milligram dose. A two-milligram dose saw a 51% reduction. Both numbers were lower than expected, and the data imply that an efficacious treatment will likely need to be combined with another drug to work sufficiently. That means more testing, more research, more money, and more time. ARWR stock took a pounding as impatient investors fled for the hills on the news.

JCPenney (JCP)

JCP stock also finished as one of Wednesday’s biggest losers, sliding 10% in trading. Rival retailer Sears Holdings (SHLD) saw its stock plunge as much as 12% in morning trading, and those two stocks tend to move in lockstep, so that didn’t help JCPenney in the markets. The real problem, however, was due to JCP’s own issues, as the department store’s analyst day didn’t go so well.

Investors, many of whom have bought into JCP stock on the thesis that the company’s turnaround plan will prove successful, were dismayed with lower-than-expected growth projections from the company today. Same-store sales, the all-important metric in the world of retail, are now only expected to rise modestly in 2014 — probably at a low-single digit rate. Previously, the company had forecast same-store sales in the mid-single digits.

Shareholders responded by selling their shares in droves, causing JCP stock to actually stop trading briefly as declines tripped circuit breakers.

Archer Daniels Midland (ADM)

Archer Daniels Midland is, by far, the largest company of today’s three decliners. Also the least volatile of the three laggards, ADM stock lost 3% on Wednesday. ADM, a titan in the agricultural products industry, just completed the acquisition of WILD Flavors GmbH for $2.2 billion. Companies that gobble up smaller businesses often get punished by Wall Street in the short-term because acquiring companies frequently pay a premium for those businesses, and the benefits from the deal take some time to accumulate.

ADM stock actually is a pretty stable investment that pays a tidy 2% dividend, so today’s slump is just a blip on the radar for long-term investors. However, if commodity prices continue to slump or remain flat in the face of a rising dollar, ADM shareholders might want to reconsider their position.

As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid.

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