Although the broad market spent the bulk of the day in profitable territory despite the surprising lull in industrial productivity last month, when push came to shove late in the day, the bears took over again. The S&P 500‘s close of 2,050.44 was 0.13% below Monday’s closing price.
Leading the modest charge lower were sizable losses from GNC Holdings Inc (NYSE:GNC), Urban Outfitters, Inc. (NASDAQ:URBN) and Vale SA (NYSE:VALE).
Here’s what investors need to know about each pullback.
Vale SA (VALE)
Take your pick of reasons Brazilian steel company was down more than 5% on Tuesday — there were several of them.
One of those reasons is that fact that the cost of a dam break at an iron ore mine co-owned by Vale has already exceeded its insurance coverage against such accidents.
Another possible reason VALE was struggling again today (and related to the first reason): Vale SA has shut down iron mining operations at the site of the dam break, which had been fueling the world’s second-most-productive iron ore pellet provider.
The biggest stumbling block of all for VALE today, however, was likely the fact that commodities — including steel prices — took yet another hit. In fact, steel prices reached multiyear lows today on concerns of weakening demand and oversupply.
GNC Holdings Inc (GNC)
GNC Holdings shares, already sliding lower after a not-surprising lawsuit was filed against it last week, took another one on the chin today after investors learned the U.S. Department of Justice was now looking to take drastic action that would likely make life very tough on nutritional supplement makers and retailers.
The lawsuit filed in Pennsylvania by Oregon’s attorney general seeks damages of $5 million stemming from sales of Picamilon and BMPEA by GNC Holdings, as they are not FDA-approved supplements and do not fit into any category of supplement the FDA recognizes.
One lawsuit won’t make or break the company, but one lawsuit can plant a very damaging seed.
The bearish flames coming from GNC were further fanned today when the Department of Justice announced it would be taking civil as well as criminal actions against suppliers and manufacturers that unlawfully advertised and sold such supplements.
It remains to be seem to what extent the DoJ will be targeting GNC Holdings (if it does at all), but the worry of it alone was enough to send GNC shares lower by 6%.
Urban Outfitters, Inc. (URBN)
Finally, for the fourth day in the past five, Urban Outfitters took a big hit, with today’s 4% pullback mostly fueled by third-quarter numbers posted after the close on Monday.
All told, Urban Outfitters earned the expected 42 cents per share in its third quarter, handily exceeding the year-ago bottom line of 35 cents per share of URBN. Sales also grew nicely from the year-ago top line of $814.5 million to $825 million. However, last quarter’s revenue was miles away from the $872 million analysts were expecting.
The selloff actually began in earnest, however, last week when retailers like Macy’s, Inc. (NYSE:M) and Nordstrom, Inc. (NYSE:JWN) reported disappointing results and outlooks that led investors to think retailing in general was hitting a major headwind. All told, URBN shares are now down more than 20% since those fears surfaced on Wednesday.
Not helping the Urban Outfitters cause is the fact that it recently decided to acquire a small chain of Italian restaurants. While there’s nothing inherently wrong with diversifying into the restaurant business, in light of the struggle Urban Outfitters is presently facing, it’s easy to interpret the sub-$20 million deal as the least productive use of money and time.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
