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Why PriceSmart, Wingstop, and iPath S&P 500 VIX Short-Term Futures ETN Slumped Today

By Dan Caplinger – Jul 8, 2016 at 6:06PM

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Even though the market soared today, these investments lost ground. Find out why.

Image source: Wingstop.

For most investors, Friday was a day to celebrate. The Dow Jones Industrials climbed 250 points on the day, and the S&P 500 closed at 2,130, less than a single point below its closing all-time high. The economic news that sent markets soaring was the monthly jobs report from the Bureau of Labor Statistics, which included favorable stats of 287,000 new jobs created in June. Unemployment rates rose to 4.9%, but that came, in part, from a substantial rise in the size of the civilian labor force on an unadjusted basis.

Broader market indexes rose about 1.5%, but some stocks failed to participate in the rally. Among the biggest losers were PriceSmart (PSMT 2.01%), Kite Pharma (NASDAQ: KITE), and the iPath S&P 500 VIX Short-Term Futures ETN (VXX).

PriceSmart sees same-store sales fall

PriceSmart fell 9% after the international warehouse retailer reported its operational results from its fiscal third quarter. The company said that club sales rose 1.4% from the year-ago quarter, with overall revenue also climbing a bit more than 1%. However, operating income fell by nearly a fifth, to $27.5 million, and net income of $16.8 million worked out to $0.55 per share in earnings, which was far less than the $0.70 per-share consensus figure among those following the stock.

In addition, comparable warehouse sales for June were down 1.9%, extending poor year-to-date figures that include a 0.9% drop in comps over the first 10 months of the fiscal year. The devaluation of the Colombian peso was part of the reason for the decline, but some fear more lasting impacts that could hurt PriceSmart's prospects in its other key markets.

Kite Pharma falls in a sector downdraft

Kite Pharma shares lost 7% in sympathy with another big loser on the day. Rival Juno Therapeutics had to halt a clinical trial for its lead JCAR015 therapy for treating a type of adult leukemia.

Patient deaths were the cause of the clinical hold, and the FDA move raised concerns not only about Juno's treatments, but also other developers using chimeric antigen receptor-transduced T cells as a potential way to fight disease. Kite Pharma has hoped that its KTE-C19 candidate to fight non-Hodgkin's lymphoma could become a successful treatment. But if the FDA grows nervous about CAR-T cell therapies generally, it could pose a future threat to Kite's prospects, as well.

The market boost hurts the fear index

Finally, the iPath S&P 500 VIX Short-Term Futures ETN dropped 6%. Big positive days for the stock market tend to make the S&P Volatility Index, also known as the VIX, fall. Investors use the volatility measure as a gauge of market fear, and today's push to near-record highs indicates a great deal of confidence in the market's prospects.

Consequently, the drop in the VIX led to a decline in this exchange-traded product, which tracks short-term futures contracts on the volatility index. Many shareholders in the ETN believe that the market can't sustain its gains, but its price hit its lowest levels in its history on Friday.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends PriceSmart. We Fools may not 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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