Apparently the bulls extended their long weekend by one day this week, as they all came back to the table today in a buying mood even without any real news to motivate them. Indeed, the November reading of the ISM Index was a six-year low, venturing into levels that suggest a recession is at hand. Nevertheless, the S&P 500 finished the session at 2,102.63, up 1.07%.
Kinder Morgan Inc (KMI)
As if things haven’t been tough enough for oil and gas stocks, Kinder Morgan took another sizable hit today.
All told, KMI shares fell nearly 5% on Tuesday following a major credit-rating downgrade. Moody’s Investor Services has lowered its outlook for Kinder Morgan from “stable” to “negative”. The revised outlook didn’t alter the Baa3 rating of the company’s senior unsecured debt or its commercial paper, though the new opinion certainly doesn’t help the beleaguered company’s cause.
Moody’s acknowledged that the lowered opinion largely stemmed from Kinder Morgan’s recent decision to take on a much bigger stake in Natural Gas Pipeline Company of America. While the official grade didn’t change, it still could, and if it did, Kinder Morgan’s debt would officially be “junk bonds.”
Today’s tumble from KMI took it to a new 52-week low. The stock is now down 47% year-to-date.
Cummins Inc. (CMI)
KMI wasn’t the only stock to get hit hard by the market’s handicappers on Tuesday. Engine manufacturer Cummins saw its stock get crushed after Bank of America/Merrill Lynch downgraded CMI from a “buy” to a “sell”.
Bank of America cited weak demand from China and a strong U.S. dollar as their core concerns. Specifically, margins are expected to contract from more than 14% to 12% by 2017 thanks to revenue falling between 5% and 8% in the meantime.
As a result of that outlook (and in conjunction with the downgrade), Bank of America/Merrill Lynch analyst Ross Gilardi lowered his price target on CMI from $115 to $90.
CMI fell 8% on the downgrade, closing at $92.41.
Ambarella Inc (AMBA)
Last but not least, just when it looked like Ambarella shares might be in the midst of a recovery, a downgrade pulled the rug out from underneath them. AMBA fell 5% on Tuesday after Deutsche Bank lowered its price target on the stock.
The prod for the lowered expectations stemmed from a channel check on wearable cameras made by GoPro Inc. (NASDAQ:GPRO). In that Ambarella technology is found inside GoPro cameras — and not found in enough other places just yet — Deutsche Bank analyst Ross Seymore became concerned about AMBA when it was discovered GoPro’s action cameras aren’t selling quite as well right now as some may have anticipated.
Seymore concedes Ambarella is making progress with other partners. It’s just not de-linked with GoPro enough yet, which poses a threat to AMBA.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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