Why Staples, Inc., Best Buy Co. Inc., and United States Steel Corp. Are Today's 3 Worst Stocks

China allegedly steals U.S. economic secrets; retailers suffer through an awful day on miserable results.

May 20, 2014 at 7:53PM
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After a few relatively tame days of trading, stocks went for a ride on Tuesday -- a Tower of Terror-esque ride that sent all three major U.S. indices lower. With nine of 10 sectors slumping, only the mundane world of utilities managed to escape unscathed. Far from unscathed, Staples, (NASDAQ:SPLS), Best Buy Co. (NYSE:BBY), and United States Steel Corp. (NYSE:X) finished as three of the worst performers in the S&P 500 Index (SNPINDEX:^GSPC) today. The S&P, for its part, lost 12 points, or 0.7%, to end at 1,872.

Retail stocks ended as some of the most abject underperformers in the entire stock market today, and shares of office supply giant Staples were no exception, plunging 12.6%. Sometimes the day's worst performers are unfairly singled out by Wall Street, losing ground because a hedge fund manager spoke ill of them, or they hailed from the wrong sector, or a scientific examination of the stock's chart displeased the chartists. Staples fell victim to none of these whims, earning every penny of today's sell-off. The company posted a fifth straight quarter of sales declines (while projecting a sixth), as growing competition from e-commerce foes and mass merchants eat away at its business. I don't blame investors for cringing at today's results.

Meanwhile, Best Buy shares shed 5.6% on Tuesday, as Wall Street found the company guilty of an egregious crime: being a retailer. That's right, folks, Best Buy finished as one of today's three worst stocks despite the fact that it doesn't report quarterly earnings until Thursday. To be fair, Best Buy's future is uncertain, and first-quarter results should give investors a useful gauge of how the turnaround is going. The company is trying to morph into more of a showroom for electronics than a mere electronics retailer as it attempts to conform to the age of Amazon.com.

Ussteel

Will China's alleged indiscretions change international commerce? Photo source: U.S. Steel

Even though United States Steel is far from a retailer, it still fell 4.4% today, earning a spot as one of the worst laggards on Wall Street. The decline is unfortunate for U.S. Steel, because it reflects an obscure threat to its business that just emerged yesterday: spying from abroad. A Pittsburgh jury officially charged five members of the Chinese military with stealing trade secrets and economic espionage, and U.S. Steel was one of the six U.S. companies Chinese officials allegedly stole secrets from. The charges are the first of their kind, and the importance of these secrets to U.S. Steel's business remain to be seen, but some of the company's competitive edge appears to be diminished.

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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 Amazon.com and owns shares of Amazon.com and Staples. 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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