Friday was a down day for the market, but investors didn't push the major market benchmarks particularly far as the streak of low volatility in the broader market continued. Losses for the Dow and S&P 500 were limited to less than a quarter percent each, keeping both indexes within spitting distance of their recent all-time record highs. Concerns about how aggressive the Federal Reserve might choose to be in pushing interest rates higher dominated the discussion among market participants to close the week, but overall economic strength prevented any losses from becoming too severe.
Nevertheless, some individual stocks suffered much larger declines than the broader market, and Melco Crown (NASDAQ:MLCO), U.S. Steel (NYSE:X), and Pure Storage (NYSE:PSTG) were among the weakest stocks on Friday.
Melco Crown deals with more Macau malaise
Melco Crown dropped 8% in the wake of disturbing news from the Asian gaming capital of Macau. The casino company's Studio City project, in which Melco Crown holds a majority interest and U.S. hedge funds hold the remaining minority interest, appears to have investors worried about its potential success. A Bloomberg report noted that the hedge funds had issued high-yield bonds to help finance their investment in the project, and the prices of those bonds have recently fallen to huge discounts compared to their par value. That suggests a high risk of potential default. In addition, bond rating agency S&P Global Ratings reduced its view on a different set of bonds tied to Studio City. Melco emphasized that Studio City bondholders have no recourse to Melco's other assets, but that doesn't mean the casino company won't take a hit if fears of a default or breach of covenants on Studio City's loans end up happening.
U.S. Steel melts down
U.S. Steel declined 7% after receiving a downgrade from analysts at KeyBanc Capital Markets. The stock has performed exceedingly well, more than doubling so far in 2016. Yet concerns about further potential declines in iron ore prices could make it difficult for steel producers to keep their prices higher. Although a bounce in the commodity markets has made investors more enthusiastic about the steel sector this year, many of those following the stock now believe U.S. Steel's share price might have advanced too much too quickly. Even with today's decline, U.S. Steel shares have more than tripled since their lowest levels in late January.
Pure Storage erases some gains
Finally, Pure Storage finished the day down 13%. The flash-storage specialist received a downgrade from analysts at OTR Global, which issued a negative rating on the stock. Pure Storage has had to deal with increased competition in the data storage space, especially as rival companies realize the potential value in serving enterprise customers and their storage needs in light of the rise in cloud computing and data analysis. Greater competition means weaker pricing, which could hit Pure Storage's profits when it reports its quarterly results next week, and some fear future business could see reductions as well. With the stock having already fallen substantially since its late 2015 IPO, Pure Storage investors will want to see signs that the fundamental business will hold up better than many fear.