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Why Barrick Gold, Silver Wheaton, and Costamare Slumped Today

By Dan Caplinger – Oct 4, 2016 at 11:30AM

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These stocks helped lead the market lower. Find out why.

Image source: Silver Wheaton.

Tuesday was a bad day for the stock market, as investors reacted negatively to the idea that the European Central Bank might eventually have to start easing back its efforts to stimulate the European economy through quantitative easing measures. Interestingly, stock markets in Europe didn't lose ground, but reports from unnamed officials at the central bank came after most markets had closed across the Atlantic.

Just as U.S. stock markets were nervous when the Federal Reserve began to ease off the throttle with its quantitative easing, some investors fear that taking the ECB out of the equation could lead to dramatic shifts in financial markets. The Dow and S&P 500 fell half a percent, but some stocks saw much worse losses. In particular, Barrick Gold (GOLD -0.16%), Silver Wheaton (WPM 0.02%), and Costamare (NYSE: CMRE) were among the hardest-hit stocks in the market today.

Barrick Gold stops shining

Barrick Gold plunged 11% on a horrible day for the gold market. Gold prices dropped $40 per ounce, closing at $1,270, and wiping out hard-earned gains in recent months. Uncertainty about the ECB was likely one reason for gold's decline, because when interest rates start to rise, the financing that gold traders use to hold onto physical bullion becomes more expensive, making it less attractive.

For its own account, Barrick actually got some good news today, saying that it had resumed operations at its Argentinian Veladero mine, and reiterating its total gold production expectations of 5 million to 5.5 million ounces for the year. After the run-up that gold mining stocks have seen in the wake of gold's move upward, today's reversal makes Barrick's losses seem consistent.

Silver Wheaton loses ground on the other white metal

Silver Wheaton fell 10%, responding to even greater weakness in the silver market. Silver bullion prices fell almost $1 per ounce, declining below the $18 per ounce level and reversing much of the gains they had achieved so far in 2016. Some market analysts noted that the Chinese market is celebrating a holiday. This has reduced physical demand for precious metals, and that could have contributed to the downdraft in gold and silver today.

Despite its name, Silver Wheaton has increased its exposure to gold streaming deals in the recent past, and so weakness throughout the precious metals complex is bad for the company in the short run. Yet past periods of price weakness have opened up opportunities for the streamlining company to make attractive deals with mining companies, and Silver Wheaton shareholders hope that things will work out well given enough time.

Costamare makes a dividend cut

Finally, Costamare plunged 19%. The shipping company announced this morning that it would slash its dividend by almost two-thirds, reducing its quarterly payout to $0.10 per share from $0.29. The shipper made the move in connection with refinancing arrangements, finalizing its $1 billion credit facility to extend a balloon payment that was originally to be due in mid-2018, and instead, amortizing that amount over a three-year period.

Saving money from dividend distributions should arguably put Costamare in a better position to retire debt, and that should be a positive for the company in the long run. Yet income investors rarely like dividend cuts, and the share-price decline reflects the efforts that Costamare had to go to in order to satisfy creditors.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of Silver Wheaton. 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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