Thursday was another example of the resiliency of the stock market, which once again recovered from an ugly morning session to finish higher on the day. Stocks initially responded badly to the aftermath of the Federal Open Market Committee decision to leave interest rates unchanged, raising concerns among some that future weakness in the U.S. and global economies could increasingly force central banks to resort to even more extreme measures in order to stimulate growth.
Later in the day, however, investors seemed to come to grips with the uncertainties involved in the situation. Internationally, the faction within the U.K. seeking to leave the European Union appeared to pick up steam, exacerbating another source of anxiety. Even though major market benchmarks finished up on the day, many stocks fell, and Korn/Ferry International (NYSE:KFY), Tetra Technologies (NYSE:TTI), and Cavium (NASDAQ:CAVM) were among the poorer performers on Thursday.
Korn/Ferry plunged 19% in the wake of a poor outlook in its fiscal fourth-quarter financial report Wednesday afternoon. The executive search and personnel specialist did better than most had expected during the quarter. Sales gains came both from its acquisition of the Hay Group, and from organic growth, and Korn/Ferry's increased diversification is resonating with its shareholders.
However, Korn/Ferry painted a less-rosy picture for the immediate future, suggesting that, in the current quarter, the company will almost certainly fall short of the earnings expectations of investors. With tepid job growth in the most-recent month, Korn/Ferry could soon have to fight adverse industry conditions that will put more pressure on the company.
Tetra Technologies dropped 14% after announcing the results of a secondary offering of stock. The company issued 10 million shares of its stock at $5.50 per share, almost exactly matching where the stock landed at the end of today, and representing a double-digit percentage discount from the share price at Wednesday's close.
With the oil and gas services company expecting to use the cash proceeds to pay down debt under revolving credit facilities and senior secured notes, balance-sheet advocates should be pleased about what Tetra is doing. The problem, though, is that issuing equity in the current poor conditions in the energy market is a risky proposition, and it's one that few investors are excited about right now.
Finally, Cavium fell 18%. The company made a bid for QLogic for $15.50 per share, with the deal paying QLogic shareholders 0.098 shares of Cavium stock per share of QLogic, plus $11 per share in cash. As a specialist in semiconductors used in enterprise, data center, cloud, and wired and wireless networking, Cavium believes that the buyout will give it a more-diverse customer base, and add to profits as soon as next year.
However, some investors believe that Cavium overpaid for QLogic, and the acquisition represents a strategic shift that could be hard to reconcile with the impression that Cavium investors had of the company. Even if the deal proves successful, Cavium will have a challenge in integrating QLogic into its overall vision as a growth leader. Without that proof, Cavium could remain under pressure for a while.