With firm consumer inflation putting a rate hike back on the short-term radar, stocks once again reversed course. Thursday’s gain was partially wiped away by the 0.38% pullback logged by the S&P 500 on Friday, which may have been even greater were it not contained by the effect of a quadruple witching day.
Here’s the deal.
Deutsche Bank AG (USA) (DB)
If you thought the $185 million Wells Fargo & Co (NYSE:WFC) has to fork over for opening two million unauthorized accounts was stiff, you haven’t seen anything yet. German investment bank Deutsche Bank AG may be on the hook for a penalty of as much as $14 billion, if the U.S. Department of Justice has anything to say about it.
The infraction in question spans back several years, to before the subprime crises and subsequent meltdown. In short, the Department of Justice says the bank improperly sold mortgage-related securities between 2005 and 2007, and must now pay the price many other banks have already paid for similar actions.
Deutsche Bank says it has no intention of paying such a hefty fee, and if it did pay the amount in full, it could create significant capitalization headaches for the struggling entity. The market isn’t so sure Deutsche Bank can escape the brunt of the DOJ’s ruling, however, sending DB shares down nearly 9.4% on Friday.
Oracle Corporation (ORCL)
Whether database service provider Oracle is doing well is largely a matter of perspective. The 4.7% dip ORCL booked today on the heels of an earnings miss says investors aren’t impressed by its performance, but a few analysts chimed in bullishly on the company following the release of its fiscal Q1 numbers.
Last quarter, Oracle earned 55 cents per share on revenue of $8.6 billion. Analysts, however, were calling for a profit of 58 cents per share of ORCL and sales of $8.7 billion.
Bernstein isn’t terribly concerned about the shortfall, noting temporary issues like currency exchange turbulence made things tough. Analyst Mark Moerdler specifically noted Oracle’s cloud division was doing well.
Cabot Oil & Gas Corporation (COG)
Last but not least, although pretty much everything was down on Friday, the energy sector names were among the worst of the worst. Leading the bearish charge was Cabot Oil & Gas; COG ended the day 3% lower.
The company didn’t do anything wrong. It was simply in the wrong place at the wrong time. With the U.S. dollar gaining 0.84% today, already vulnerable oil prices once again became an easy target. Crude oil ended the day near $43.80 per barrel, down 1.6% for the session.
Fanning those bearish flames that singed COG may have been another uptick in the Baker-Hughes rig count. Although only two more were brought online last week, it’s the eleventh week in the past twelve that the number has grown. It points to an increased supply of oil, which puts further downward pressure on oil price.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.