Without any good news to distract them from the fact that stocks are technically overbought and fundamentally overvalued, investors tested the bearish waters again today. And this time, they took a bigger bite. The S&P 500‘s close of 2,172.47 was 0.14% below Wednesday’s close, but more than that, pulled the index under a key support line near 2,175.
Here’s why these three names were hit as hard as they were.
Dollar General Corp. (DG)
Deep discount chain Dollar General undeniably had to do whatever it had to do to compete with drastic price cuts from giant rival Wal-Mart Stores, Inc. (NYSE:WMT). Problem is, the price war has taken a much bigger fiscal toll on Dollar General — and now DG shares — than it ever will on Wal-Mart.
The bad news: In its second quarter of the year, Dollar General earned $1.08 per share on $5.39 billion worth of revenue. Both were better than the year-ago comparisons when the retailer earned 95 cents per share of DG on sales of $5.10 billion. The pros, however, were expecting a profit of $1.09 per share and sales of $5.5 billion.
Buckingham Research commented in the big miss, “The laundry list of reasons for the sales slowdown is also not particularly reassuring.”
DG shares ended the day down 17%, while close-cousin Dollar Tree, Inc. (NASDAQ:DLTR) fell 10% after investors assumed the two are suffering a similar fate.
Express Scripts Holding Company (ESRX)
It may have only been a victim of circumstance, but it was a victim nonetheless. Express Scripts Holding shares fell 6% after Mylan NV (NASDAQ:MYL) announced it would be lowering the price of its EpiPen, which can be used to treat dangerous allergic reactions.
The matter was put front and center this week when the U.S. Senate Judiciary Committee Chairperson Chuck Grassley asked Mylan CEO Heather Bresch to explain the more-than-400% price hike for the EpiPen in less than a decade. Recognizing there was no good answer, Mylan acquiesced and cut the price of the EpiPen by nearly half.
The lower price is also a big blow to Express Scripts Holding Company, which enjoyed a steep markup on the devices it sold to consumers. Rival CVS Health Corp (NYSE:CVS) is also vulnerable to the EpiPen price cut, sending CVS shares lower by more than 3%.
St. Jude Medical, Inc. (STJ)
Finally, it remains to be seen if the accusations are true or not, but St. Jude Medical investors weren’t taking any chances. STJ stock tumbled 5% on Thursday following reports that research firm Muddy Waters’ Carson Block cautioned the company’s medical devices have a major security flaw. Specifically, Block warned that St. Jude Medical’s Merlin@home remote monitoring devices don’t make secure connections with the patient’s monitoring service.
St. Jude Medical denies the allegation, responding that its equipment uses several security protocols. It’s also worth noting that Muddy Waters has a history of making strong, publicized accusations including of companies he may be holding a short position in. In those cases, Block could profit from their stock’s pullback.
Interestingly, Muddy Waters’ claim materialized just before Abbott Laboratories (NYSE:ABT) was to complete the acquisition of St. Jude Medical. The claim could prompt Abbott to back out of the deal, which would send STJ shares plummeting.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.