Inspired by a better-than-expected revision to the first GDP growth estimate for Q3 and a huge leap forward in consumer confidence, the bulls drifted their way back into the market on Tuesday, but just barely. The S&P 500‘s close of 2,204.66 was 0.13% stronger than Monday’s close.
Here’s the deal.
Vale SA (ADR) (VALE)
The glass could have been viewed as half-empty or half-full on several different fronts today, but in all cases, the market interpreted it as half-empty.
Arguably the biggest driver of the 6% setback VALE shares suffered today was the possibility that the iron mining and smelting company may not shed some assets after all. The implosion of ore prices took a big bite out of Vale shares earlier this year, forcing the company to start planning select divestitures if it was to stay afloat. With iron prices rising modestly this month though, some suspect Vale may be rethinking those plans. Others, however, don’t believe the recent price relief is enough to keep the company solvent as is.
Fanning the bearish flames that scorched VALE on Tuesday, however, was a wave of news pointing out that Chinese demand for ore slumped significantly in October. If that’s a trend, Vale is pointed back into a headwind with or without assets sales.
Mallinckrodt PLC (MNK)
Already fighting an uphill battle since Citron Research’s Andrew Left suggested the drugmaker was highly vulnerable, Mallinckrodt PLC took another big hit today following the company’s fiscal fourth-quarter report.
Profits were good … perhaps even great. Mallinckrodt earned $2.04 per share on sales of $887.2 million, versus estimates for a profit of $1.98 per share of MNK and revenue of $862 million. But, between production issues for one of its immunotherapies and an ongoing headwind for all specialty drugs, the company’s guidance was lackluster. Sales of generic drugs are expected to fall by a double-digit pace the coming year as well.
Today’s 9.1% selloff from MNK brings the two-week rout to a painful 22.8%.
Marathon Oil Corporation (MRO)
Last but not least, most oil stocks ended the day in the red, but on a volume/market cap basis, Marathon Oil Corporation dished out the most pain with its 3.8%.
The selloff was spurred by the 3.9% tumble crude oil prices took today, which was in response to a strong likelihood that OPEC will not be deciding to curtail oil output at a key meeting scheduled for tomorrow. For a short while it looked as if the oil cartel would cut its output as a means of boosting oil prices … a maneuver that would benefit non-OPEC producers as well.
However, with the prospect of threatened market share now looming, a few key OPEC members have already expressed hesitance to pare oil production.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.