Tuesday brought another day of record gains to the stock market, with the Dow Jones Industrials joining the S&P 500 at new all-time highs. Investors appear to be growing more comfortable with the prospect of economic uncertainty, especially as they see the Federal Reserve and other central banks lining up to continue their efforts to stimulate the global economy through monetary policy moves. Stocks rose at the expense of bond prices on Tuesday, and the yield on the 10-year Treasury bond rose above the 1.5% mark. Major market benchmarks added around two-thirds of a percent on the day, but several stocks missed out on the rally entirely.
LendingClub takes another reputational hit
LendingClub fell 6% after The Wall Street Journal ran an article that was critical of the company's track record with its borrower customers. The article noted that even though consumer credit quality has improved in recent years, charge-off rates at the online lender for lower-quality loans have risen by nearly 1.75 percentage points over the past three years, climbing above the 6% mark. The rise in uncollectible debt levels casts doubt on the company's proprietary algorithms that are designed to identify the likely ability of borrowers to repay their loans on time, and debt-to-income ratios for LendingClub's borrowers have also climbed in recent years. The concern among investors is that charging borrowers more in interest might not be enough to entice would-be investors to buy loans, and that could create long-term problems for the online lender's business model.
DRDGOLD plunged 14% on a bad day for gold mining stocks generally. A big drop in the commodities markets reversed huge recent gains for the yellow metal, and gold prices fell nearly $23 per ounce to $1,334 on Tuesday as the move back to stocks hurt the safe-haven play. The decline in gold hurt most companies in the industry, but the South African miner took a larger hit in part because the value of the South African rand compared to the U.S. dollar rose, making the percentage drop in gold prices even bigger in terms of DRDGOLD's local currency.
With a dividend yield of 4.5%, DRDGOLD is an unusual income stock for the gold mining industry, but that also makes its stock somewhat more sensitive to the ups and downs of the commodities market, because shareholders fear that downturns could lead to dividend cuts in the future.
First Majestic Silver takes a break from a big run
Finally, First Majestic Silver dropped 6%. Silver prices followed those of its more valuable counterpart lower on Tuesday, with the white metal losing about 1% to close just above the $20 per ounce mark. That was enough to send shares of the major silver miner lower, especially given the extent of the stock's upward run during silver's boom over the past couple of weeks. What First Majestic and its peers want to see is evidence that the recent bull run in commodities can continue, and if industrial demand starts to chip in and produce better earnings prospects for the mining industry, First Majestic in particular is in an ideal situation to benefit. After such a big rise, though, it's natural for First Majestic to take a break on a poor day for the metals markets.