Lack of Energy Drags These Stocks Lower

Not that anyone actually believed him, but there was a time not too long ago when President Obama flat-out denied the country would go off the rails with the fiscal cliff and allow sequestration to happen. Yet we're now mere days away from seeing that happen, and the markets are getting jittery about what it actually means. The Dow Jones Industrial Average (^DJI 0.40%) fell 158 points on Friday, with every single component of the index falling into the red.

While the financial components of the Dow were down around 1% or more, it continues to be the tech segment that shows the greatest weakness, with Hewlett-Packard (HPQ -0.46%) dropping more than 2.5% and Microsoft (MSFT 1.82%) off 1.5%.

Yet oil stocks also took a sustained hit, with ExxonMobil (XOM -2.78%) and Chevron (CVX 0.37%) dropping about 2% as well, pushing the energy sector as a whole down 1%, after EPA administrator Lisa Jackson announced she was stepping down. Although the speculation was that she would challenge New Jersey's Chris Christie for the governor's seat, it meant there was doubt about who would replace her: someone even less accommodating to the industry or one who would fulfill Obama's rhetoric about offering an all-of-the-above energy solution. Markets may hate uncertainty, but the drop suggests oil companies will feel the impact of another failed promise.

While the three following companies managed to do worse than the Dow and its lagging components, it wasn't as much of a wholesale rout as the looming fiscal cliff would suggest. Still, the markets fell broadly, with two-thirds of the stocks on the NYSE and Nasdaq  exchanges going negative.

Now, don't go running over the cliff with them like a bunch of lemmings: it could just be a temporary situation. Let's first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.

Choking on coal dust
With change coming to the EPA, it's not surprising we'd find coal stocks leading the way lower. And coal fared even worse than the broader energy sector, dropping 2.5% as James River Coal led the way down. No other industry has been more left out of a comprehensive energy policy than coal, so we find Peabody Energy (BTU) and Arch Coal (NYSE: ACI) also off sharply. The agency has imposed strict limits on pollutants such as carbon dioxide, mercury, and sulfur dioxide, making it more expensive for utilities to burn coal for energy generation.

These names have had to battle not only against the administration's animus, but also against rival energy plays such as natural gas, which has proved to be just as cheaply priced and just as abundant. That's at least part of the reason many utilities have converted over to gas-fired plants. Having a new, tougher administrator take control of the environmental agency won't help the movement away from coal, and weak players like James River remain most at risk.

In cold storage
Even though OCZ said two weeks ago that its investigation into what went wrong last quarter was largely completed, which caused its stock to jump at the time, investors remain wary until the report is finally released and it files restated financials. The bid to gain share against Seagate Technology (STX) and Western Digital (WDC 2.77%) went awry, and it lost control of customer rebate programs. That led to massive losses and caused its founder and CEO to abruptly resign.

When all is said and done, OCZ is still standing on the precipice. It's in default on its borrowings, and we can expect margins to really narrow as management intimated that it was letting old inventory go at fire-sale prices. While its lender may renegotiate terms to its credit facility, there's nothing to suggest it will be on terms favorable to OCZ. In the end, a buyout remains the storage specialist's best hope.

Hanging up on logic
For handset maker Nokia, it's a curious turn of events: Its new Lumia line of phones is selling well in the U.S. and in China. In fact, they keep running out of the phones every time they get a shipment in! Yet its stock falls because of the shortages. Seems strange to me that when there's a run on iPhones and lines stretch around the corner because of demand, Apple's (AAPL -0.35%) stock doesn't drop. It's seen as a good thing that there's an excess of demand. Yet it seems investors fear that those who want a Nokia phone will go elsewhere if the Lumia's aren't available, so it's either faulty logic or it underscores the precarious position the handset maker finds itself in. I'm leaning toward screwy logic, but let me know in the comment section below if you think people who want a Lumia will simply go elsewhere if they have to wait a short while to get it.