Pullbacks for the stock market have been few and far between lately, but investors have seen a fairly substantial downward move in stocks over the past couple of days. With the stock market still very close to record highs, there aren't that many stocks setting yearly lows, but a sustained correction could make that number soar if the market finally changes gears from its buy-the-dips mentality. Already, we've seen some well-known stocks reach new lows, including Krispy Kreme (NYSE:KKD), MBIA (NYSE:MBI), and ITT Educational Services (NYSE:ESI).
Krispy Kreme gave up 1% as competition in the doughnut space has ramped up recently. With its most recent reports indicating that customer traffic has been on the decline, Krispy Kreme is now having to deal with aggressive expansion plans from rival Dunkin' Brands as well as other breakfast- and coffee-oriented chains. In particular, Starbucks has ramped up its food offerings once again as it tries to become a destination eatery as well as a coffee giant, and those efforts could lead Krispy Kreme to miss out on an important part of its overall business. Even with the declines, though, Krispy Kreme still stands at almost triple its share price from as recently as mid-2012.
Municipal-insurance giant MBIA fell 3.5% as investors continue to worry about the company's exposure to the Puerto Rican bond market. Puerto Rico has a huge amount of debt, but as a territory of the U.S., that debt enjoys favored status as tax-free not only for federal income tax purposes but also for state and local taxes throughout the country. The voracious appetite for tax-favored bonds led to massive debt offerings, but now, investors are concerned that the territory won't be able to repay those bonds without a huge default. In turn, to the extent that MBIA might be liable for guarantees on those Puerto Rican bonds, shareholders are nervous that a hard-fought recovery from the financial crisis might be all for nothing. With estimates of nearly $5 billion in potential exposure to Puerto Rico, MBIA will need to address investor concerns quickly in order to avoid another crisis.
ITT Educational Services dropped 1.5% as trouble in the for-profit education sector continued to brew. Last week, ITT found out that because it missed a deadline to file its financial reports, it could see a drop in funding from the U.S. government, which is a key source that many of its students rely on to finance their education. The government wants ITT to account for its student-loan liability properly, but thus far, the company hasn't complied with the directive. Meanwhile, the decision from for-profit peer Corinthian Colleges to put its underperforming schools up for sale reflects just how serious regulators are about ensuring that federal aid is used in as efficient a manner as possible. ITT could continue to see heightened scrutiny until it establishes it's back on firm financial footing.
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