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Why JPMorgan Chase, Pfizer, and Goldman Sachs Were the Dow's Worst Stocks Last Week

Two straight days of triple-digit declines, including a massive 267-point drop on Thursday, helped pull Dow Jones Industrials (DJINDICES: ^DJI  ) down about 2.4% for the week. With the Dow having gone so long without a major pullback, investors have been a bit trigger-happy about selling at the slightest hint of trouble ahead, and that sentiment was evident over the past week, especially among high-flying sectors like biotechnology and social media. For the Dow, though, JPMorgan Chase (NYSE: JPM  ) , Pfizer (NYSE: PFE  ) , and Goldman Sachs (NYSE: GS  ) were the worst performers of the week, with all three falling between 6% and 8%. Let's take a closer look at why these three stocks led the losers' list.

JPMorgan Chase's earnings report on Friday morning got the lion's share of attention not just for investors in the bank but across the stock market, as its troubling report emphasized the struggle that CEO Jamie Dimon and his management team will face in trying to keep growth at reasonable levels. Plunging earnings across its business lines suggested that JPMorgan might have nowhere to hide, yet the stock actually lost more ground on Thursday before its earnings report. JPMorgan Chase will have to deal with higher capital requirements and tougher regulation as well as a Republican-proposed big-bank tax, all the while dealing with an economic environment in which businesses have free access to capital markets directly without going through banks. Shares are still valued cheaply, but JPMorgan Chase needs to give investors a solid strategy going forward to regain its recent record-setting levels.

Pfizer's drop came amid general disdain for biotech and pharmaceutical stocks generally, but news of a study that could potentially link Viagra use with greater risk of melanoma helped add to the drug giant's declines. The study is an early stage look at the issue, and even the researchers themselves admitted that further scrutiny would be necessary before anyone should draw definitive conclusions about Viagra and the severe skin cancer. The news made investors largely ignore positive data from a mid-stage study of Pfizer's palbociclib, which has the potential to become a blockbuster breast-cancer treatment. With huge amounts of legal liability against various drug companies with similar problems in the past, Pfizer has to manage its risk to avoid what could become a much bigger problem down the road.

Goldman's declines came from many of the same factors that held back JPMorgan this week, including the coming 5% minimum capital requirement on big banks. Indeed, many investors expect Goldman Sachs to suffer even steeper drops than JPMorgan did when it reports its own quarterly results next week, as it has struggled to try to make its profitability recover toward post-crisis levels. Unless surprisingly low rates spur more activity in the bond market, which is a bastion of strength for Goldman Sachs, it could be problematic for Goldman to get back its former glory -- especially as regulators tighten their grip on the industry.

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  • Report this Comment On April 14, 2014, at 2:08 PM, captainern wrote:

    is it coincidence that dimon, read and blankfein are the most selfish ceo's on the planet?

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Dan Caplinger
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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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Related Tickers

7/29/2014 4:27 PM
^DJI $16912.11 Down -70.48 -0.42%
DOW JONES INDUSTRI… CAPS Rating: No stars
GS $175.54 Down -0.41 -0.23%
Goldman Sachs CAPS Rating: ***
JPM $58.64 Down -0.55 -0.93%
JPMorgan Chase & C… CAPS Rating: ****
PFE $29.73 Down -0.37 -1.23%
Pfizer CAPS Rating: ****

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