Teetering on the brink of a meltdown for a little too long, the overbought market finally collapsed today. The S&P 500 closed at 2,344.02, down 1.24%, qualifying Tuesday as the worst day for stocks before November’s election. There was no specific, news-based prod for the pullback. Traders were just ready and they inflicted quite a bit of technical damage that will be difficult to shrug off.
Bank of America Corp (BAC)
Talk about being in the wrong place at the wrong time. Bank of America shares were upended on Monday not because of anything the company said or did, but because of the conclusions investors drew.
It wasn’t the market’s massive selloff that spooked BAC. It may have been a contributing factor, but not the core cause. Neither were rekindled worries that President Trump’s economic growth policies may be on hold until further notice.
The core cause of the trouble Bank of America shares — along with other banking stocks — faced on Tuesday was a sharp dip in interest rates, and long-term rates in particular. Bank stocks had been edging higher on the prospect of rising interest rates, but now traders may be thinking they overshot.
BAC ended the day down 5.8%.
Fiat Chrysler Automobiles NV (FCAU)
As was the case with BAC, shares of Fiat Chrysler were already dealing with the headwind of a marketwide selloff. And, like Bank of America, the recent runup FCAU has mustered since November of last year made it an easy profit-taking target. Fiat Chrysler Automobiles still had plenty of extra bearish help, however. French prosecutors are opening an investigation of the company, aiming to determine if the carmaker fudged results of diesel fuel emissions testing.
If it rings a bell, there’s a reason. Volkswagen AG (ADR) (OTCMKTS:VLKAY) went through a similar ordeal in 2015, leading to a guilty plea earlier this year in a trial over the matter. General Motors Company (NYSE:GM) has also faced legal headaches for similar reasons.
The investigation does not inherently imply guilt. But, it does look concerning enough to send FCAU shares 5.3% lower on Tuesday.
Cheetah Mobile Inc (ADR) (CMCM)
Finally, Chinese app developer Cheetah Mobile gave us a not-so-gentle reminder on Tuesday that earnings season isn’t quite over yet. CMCM shareholders paid the price for an alarming outlook, giving up 10.5% of their value by the time it was all said and done.
For the quarter ending in December, Cheetah Mobile generated $184 million worth of revenue, topping estimates of only $178 million. But, guidance for the current quarter was a range of only between $166 million and $172 million, versus analyst estimates of $172 million.
The proverbial death blow to CMCM today was the announcement that CFO Ka Wai Andy Yeung would be stepping down. No replacement has been named.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.