With the broad market still within sight of record highs but most stocks not quite justifying their current prices with trailing results, investors were hesitant again on Wednesday. The S&P 500 ended the session at 2,435.61, down 0.06% for the day.
It could have been worse though, and for Chicago Bridge & Iron Company N.V. (NYSE:CBI), Apache Corporation (NYSE:APA) and Caterpillar Inc. (NYSE:CAT) shareholders, it was worse. Each of these names booked sizeable losses even though the overall market was merely lethargic.
Here’s the deal.
Caterpillar Inc. (CAT)
Don’t look for an explicit reason shares of Caterpillar lost on Wednesday — you won’t find one. Indeed, with the echoes of Tuesday’s report still ringing, CAT should have arguably been up today. Sales for the three-month period ending last month were up 8%.
But, there it is. CAT stock fell 3.3% on Wednesday. What gives?
Realistically speaking, it was likely a “buy the rumor, sell the news” phenomenon. CAT had advanced 15% between the end of March and Tuesday’s close, as investors had sensed revenue growth was brewing. That suspicion was confirmed today, but Caterpillar had nowhere else to go.
Apache Corporation (APA)
Another bad day for oil prices meant another bad day for oil stocks. Marathon Oil Corporation (NYSE:MRO) fell 3.7% in response to crude’s 2% setback, while Continental Resources, Inc. (NYSE:CLR) was off 3.8%. In terms of the total amount of devastations dished out to shareholders though, Apache Corporation took that top (dis)honor today. APA fell 4.3% on Wednesday, reaching new multi-month lows in the process.
The prod for crude’s weakness was more of the same. The EIE reported this morning that the nation’s oil stockpiles fell again for a second week, suggesting the glut is finally abating. APA and MRO stockholders are a bit startled to learn, however, that domestic production of crude oil also ramped up to a pace 9.35 million barrels per day.
Tyler Richey, co-editor of the Sevens Report, opined:
“The biggest headwind for the market remains the steady trend of rising U.S. oil output as it is offsetting the efforts of global production-cut agreement, and at the same time damaging morale among [the Organization of the Petroleum Exporting Countries] producers who are actively forfeiting market share to the U.S. As prices decline and U.S. output continues to trend higher, the odds of OPEC and Non-OPEC nations cheating on their production quotas increases.”
Chicago Bridge & Iron Company N.V. (CBI)
Last but not least, though shares of Chicago Bridge & Iron Company were already down 50% since the end of April as of Tuesday’s close, the sellers weren’t even close to being done with it yet. CBI lost another 11.8% of its value on Wednesday on news that requires some connecting-of-the-dots to understand.
In February, Chicago Bridge & Iron announced it would be spinning off it maintenance and services division called ‘Capital Services.’ Today, before any divestiture has materialized, Moody’s lowered its credit rating on much of Capital Services’ debt to a less-than-comfortable B3.
Although the weak opinion doesn’t seem to have scuttled Chicago Bridge’s spinoff plans, it didn’t paint an encouraging picture of the construction company either. Moody’s analyst Prateek Reddy explained:
“While risks exist related to financial sponsor ownership, muted near-term revenue and earnings growth, and execution of the carve-out transition and project management, Capital Services’ leverage profile and anticipated free cash flow generating ability position the company well within the B3 rating category.”
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.