A lot has gone right for the stock bulls this week. The Federal Reserve made an emergency 0.50% interest rate cut — its first inter-meeting policy stimulus since the financial crisis.
The fear around the COVID-19 virus seems to be subsiding slightly. And former Vice President Joe Biden enjoyed a leading performance in Super Tuesday voting, putting a moderate back in front of the pack vying for the Democratic Party’s presidential nomination.
Wall Street is reacting with glee, helping the major average stabilize after last week’s downright scary volatility. But the good news isn’t universal, with a number of S&P 500 components still moving lower.
Here are four large-cap stocks under pressure:
Norwegian Cruise Line Holdings (NCLH)
The bottom absolutely continues to fall out from beneath leisure and travel-related stocks like Norwegian Cruise Line Holdings (NYSE:NCLH), with prices down nearly 50% from their recent high as people cancel their vacation plans on pandemic fears. Older folks are especially into cruises but are also COVID-19’s favorite target to put into hospital. And everyone has been following the horrible situation faced by those trapped in quarantine on the Diamond Princess in Japan.
On March 3, CNBC’s Ryan Ruggiero tweeted that the company’s CEO was set to meet with Vice President Mike Pence on March 7 in Florida to discuss the hit the company is facing amid the virus outbreak.
Analysts at Deutsche Bank recently downgraded shares to “hold,” noting that despite significant selloffs, the outlook remains bleak.
MGM Resorts (MGM)
MGM Resorts (NYSE:MGM) shares are down roughly a third from their recent high, returning to the lows seen in late 2018 to break a three-year uptrend pattern. Investors are fleeing on worries the COVID-19 outbreak will keep gamblers and vacationers away from its properties in Macau and Las Vegas. Which, let’s be honest, it no doubt will.
Adding to the pressure on shares was a recent report the company was subject of a data breach last year.
When the company last reported results back in February, as the COVID-19 virus was ravaging China, earnings missed estimates by 19 cents per share on in-line revenues. Management withdrew their 2020 guidance. Former CEO Jim Murren, who had been in place since 1998, also unexpectedly stepped down. Not a good sign either.
Retailers like Kohl’s (NYSE:KSS) are set to be squeezed on two fronts. On the demand side, shoppers are likely to stay home at the margin as they embrace “social distancing.” On the supply side, with Chinese factories still shuttered, the influx of cheap manufactured clothing will soon slow, keeping shelves bare. As a result, shares are down roughly 40% from their recent highs returning to levels not seen since the middle of 2017. The wipeout from the late 2018 is even larger, at roughly 50%.
Analysts at the Telsey Advisory Group recently downgraded their price target as management continues to show an inability to keep pace with today’s consumer. An upcoming analyst day on March 16 could help sentiment, but given the macroeconomic headwinds mentioned, it’s hard to see how they could restore confidence quickly.
Bank of America (BAC)
Bank of America (NYSE:BAC) shares have dropped roughly a third from their recent high, as troubles in the inter-bank lending market have forced the Fed to inject billions this week to keep interest rates down. How many billions? Some $120 billion, in a clear sign that big banks are feeling acute funding stress amid the ongoing market turbulence and a slowdown in manufacturing activity in Asia.
Adding to the pressure on the stock was a recent downgrade by analysts at Atlantic Equities. All this comes despite the fact the company, along with many other Wall Street giants, reported solid earnings results back in January. Times have quickly changed.
As of this writing, William Roth did not hold any of the aforementioned securities.