Even Disney's Magic Can't Stop the Dow's 326-Point Plunge

Education Management craters while StealthGas bucks the trend.

Feb 3, 2014 at 6:01PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Wall Street institutions, which had been supremely confident in a Denver Broncos Super Bowl victory last night, sold off stocks steeply on Monday to pay off their bookies. But investors can be thankful, since the infallible "Super Bowl Indicator" -- which tells us the market will rise any year an NFC team (i.e., the Seattle Seahawks) takes the Lombardi Trophy -- is in the bulls' favor.

I kid, of course; the real explanation for today's slump had nothing to do with sweaty 300-pound men and everything to do with the state of U.S. manufacturing. The state of U.S. manufacturing happens to be very disappointing. The ISM Manufacturing Index, which stood at 57 in December, dropped the most since May 2011 to a 51.3 January reading. Wall Street blamed weather for the slump, but investors weren't buying it, and the Dow Jones Industrial Average (DJINDICES:^DJI) plummeted 326 points, or 2.1%, to end at 15,371. 

The magic of Walt Disney (NYSE:DIS) is nearly limitless. Their theme parks can create timeless memories, their characters can bring children unparalleled joy, and the Disney-owned Star Wars franchise boasts Jedis with telekinetic powers. But even Walt Disney didn't have the power to prevent its stock from slumping 3.6% Monday. Twenty-nine out of 30 Dow stocks lost ground during today's broad-market sell-off, so Disney shareholders are by no means suffering in solitude. Plus, Super Bowl MVP and Seattle Seahawks linebacker Malcolm Smith promised he'd be going to Disney World last night, so its theme parks obviously still resonate with adults. Disney reports quarterly earnings on Wednesday, so stay tuned -- we may be seeing more volatility in a few days. 

The only thing Education Management (NASDAQOTH:EDMC) has in common with Disney is its next quarterly earnings date, which is also this Wednesday, Feb. 5. Education Management stock fell a whopping 7.4% Monday, as concerns continue to swirl around the for-profit education company's legal risk. Several law firms have encouraged shareholders to come forward and file suit against the company, which the firms say may have violated its fiduciary duty to shareholders. Student lending practices and graduate placement statistics were cited as areas of inquiry. Shares are down more than 25% in the past five days on the litigation concerns, and investors should be extremely careful investing in a company with so much heat.

Ignoring the fearful attitude of the day, shares of StealthGas (NASDAQ:GASS) added 2.9% by the ring of the closing bell on Monday. The Greek company primarily ships a variety of oil and gas products to customers around the world. With a market cap of about $316 million, StealthGas is a tiny company as far as Wall Street's concerned, which generally makes shares more subject to volatility. StealthGas' Monday press release announcing the acquisition of two more vessels as well as the arrival of a new CFO and CTO was cheered by investors who see today's changes as the beginning of a new chapter for the company.

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John Divine has no position in any stocks mentioned. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.

The Motley Fool recommends and owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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