With the three day holiday weekend fast approaching and traders not wanting more to worry about over the break than they have to, the market sold off rather well — but on tepid volume — today. The S&P 500‘s close of 2,260.96 was 0.19% worse than Wednesday’s last trade.
Here’s the deal.
Red Hat Inc (RHT)
Software company Red Hat may have topped its earnings estimates for the third quarter, but disappointing revenue and the unexpected exit of its CFO sent RHT shares tumbling to the tune of 13.9%.
After Wednesday’s closing bell rang, Red Hat reported Q3 earnings of 61 cents per share on sales of $615.0 million. Analysts were only calling for a bottom line of 58 cents per share of RHT, but had also projected a top line of $618.5 million. The company doesn’t expect to see sales strengthen much in the immediate future either, offering a revenue outlook that will likely fall short of the $637.7 million in sales the pros are expecting for the current quarter.
Fanning the bearish flames that burned RHT on Thursday was news that Red Hat CFO Frank Calderoni would be leaving the company to take on a CEO role at another company. It’s a disruption that couldn’t have come at a worse time for Red Hat.
Gap Inc (GPS)
Retailer Gap didn’t do anything wrong, per se, on Thursday, other than be in the wrong industry at the wrong time. That was still enough, however, to send GPS shares down a hefty 5.4%.
Gap shareholders can blame Bed Bath & Beyond Inc. (NASDAQ:BBBY) for the setback. The home-goods retailer fell a little short of its fiscal Q3 revenue expectations, and a lot short of its earnings forecasts. The company posted a profit of $0.85 per share of BBBY on sales of $2.96 billion, but analysts were calling for earnings of 98 cents per share and revenue of $3.01 billion.
That was enough to send BBBY shares to a loss of 9.2% for the day.
It was also enough to force investors to fear the worst for the more prolific large caps in the industry. Target Corporation (NYSE:TGT) fell 4.4%, and Kohl’s Corporation (NYSE:KSS) was off by 5%. The pullback from GPS, though, was the biggest among the large cap retailer stocks. [BBBY was the biggest loser among all mid-cap stocks though.]
Twilio Inc (TWLO)
Last but not least, cloud-based telecom company Twilio was upended on Thursday after a dishing out a heroic 15% rally on Wednesday. In fact, today’s selloff was largely set up by Wednesday’s bullish surge.
That large advance was put in motion by a curious lack of selling on Tuesday, when millions of TWLO shares purchased as part of its public offering became unrestricted, free-trading shares. The market was expecting a large selloff driven by profit-taking, but when it didn’t happen, not only did owners breathe sigh of relief, it emboldened a large number of sidelined would-be buyers.
Bolstering the bullish case for TWLO on Wednesday were reports that the company was expanding its partnership with Amazon.com, Inc. (NASDAQ:AMZN). The bulls may have moved a little too far, too fast, however, as TWLO ended today’s action down by 8.3%.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.