Sector Snap: Mining Equipment Makers Falling

Shares of two major mining equipment makers tumbled Tuesday after an analyst began covering them with a "Neutral" rating and a warning of "mounting cyclical headwinds."

JPMorgan analyst Ann Duignan said in a note that the sector has "recently underperformed on growing signs of a global economic slowdown, the notion of demand destruction, and simply investor rotation."

She initiated coverage of South Milwaukee, Wis.-based Bucyrus International Inc. and Milwaukee, Wis.-based Joy Global Inc. with a "Hold"-equivalent rating on shares of both companies.

"We are cautious in the near term and await better visibility into how the weakening global economy will impact demand for commodities," she wrote.

The analyst also said both companies' shares are strongly correlated with recently weakening coal prices.

"The global economy is 'sputtering.' This, in our view, represents a material risk to mining equipment companies as coal consumption is correlated with (gross domestic product). Leading indicators for the U.S. and Eurozone point to further weakness, while Japan is in a recession."

Shares of Bucyrus fell $7.41, or 10.6 percent, to $62.44, and shares of Joy Global fell $4.15, or 5.9 percent, to $66.89.