Despite a very rough start to the day on the heels of surprisingly disappointing job-growth news and last month’s unemployment rate, the bulls jumped in after seeing red and pushed the market back into the black for the day. On Friday, the S&P 500 gained 1.43% to close at 1951.36 for the week.
Not every stock swung back into the black though. United Continental Holdings Inc (NYSE:UAL), Bank of America Corp (NYSE:BAC) and Interactive Brokers Group, Inc. (NASDAQ:IBKR), for instance, remained deep in the red … though for understandable reasons.
Interactive Brokers Group, Inc. (IBKR)
For the first time in a long time, it wasn’t commodity or energy stocks deepest in the red on Friday — it was, of all things, brokerage firm stocks, with the bearish charge being led by Interactive Brokers Group.
The prod for the pullback from IBKR was last night’s report of September’s daily average revenue (bearing) trades, or DARTS. Though they were up 15% on a year-over-year basis, they fell 10% on a month-to-month basis.
The market was looking for more.
That being said, the likelihood that interest rates will stay lower rather than edge higher in December — as had been expected — also worked against brokerage stocks like IBKR. Not only are rising rates apt to spur some trading activity, but margins widen with higher interest rates for those companies that offer money market and margin lending.
With rising rates already built into its price, IBKR closed 4% lower on Friday.
United Continental Holdings Inc (UAL)
The good news is, United Continental Holdings has someone at the helm again following the modestly scandalous exit of former CEO Jeff Smisek, who stepped down after allegations were made that he traded favors using the company’s resources. Oscar Munoz is now in charge of UAL.
The bad news is, it only took Munoz three weeks to publicly say the pairing of United and Continental hasn’t exactly been a success. His exact words: ” “Let’s be honest, the implementation of the United and Continental merger has been rocky for customers and employees.”
The honesty is a breath of fresh air, but it may have been a little too real too soon for UAL shareholders who weren’t quite ready for the truth, sending the stock down 2.3%.
The selling flames were fanned by the announcement that United Continental pilots didn’t feel $3 billion set aside for a stock buyback of UAL was the most productive use of that money. If Munoz listens — and he just might — a big swath of the presumed future demand for the stock could wither away.
Bank of America Corp (BAC)
Last but not least, take your pick of reasons why Bank of America shares lost more than a full percentage point of their value today — there were two big ones.
The biggest of the two reasons BAC suffered a setback on Friday was the same reason IBKR stumbled. That is, the interest rate hike so many financial institutions were counting on in December as a way to widen margins effectively went away today.
The second reason Bank of America took a hit was news that its brokerage arm Merrill Lynch can indeed be tried in a class action lawsuit stemming from the Zale buyout debacle. The suit claims that Merrill did harm to investors by not facilitating the best possible price in the deal, and not disclosing possible conflicts of interest.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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