Stocks regained some lost ground on Friday, powered ahead by a better-than-expected showing on the labor front. New job gains topped economists' projections by nearly 50,000 during the month of June, and that quelled some concerns that the Federal Reserve might have already acted too aggressively to boost interest rates in a period in which data on economic growth has been tepid at best. Gains in the major benchmarks ranged from around 0.5% to 1%, but there were some areas of the market that were hit relatively hard despite the generally positive mood on Wall Street. Frontier Communications (FTR +0.00%), Smart Sand (SND 4.39%), and Eldorado Gold (EGO 4.28%) were among the worst performers on the day. Below, we'll look more closely at these stocks to tell you why they did so poorly.
Frontier makes a scary split
Shares of Frontier Communications finished down 4% after the telecommunications company moved forward with its decision to do a reverse split of its stock. As of Monday, Frontier shareholders will find that they have only one share of stock for every 15 shares that they owned as of the close of business on Friday. The trade-off is that each share should be worth 15 times as much, but often, companies that do reverse splits find that the brief boost in the stock price only emboldens short-sellers to increase their bets against a stock. Frontier has gone through big setbacks lately, including its decision to slash its dividend in May and new concerns about its sustainability. With large amounts of debt, Frontier will have to work hard to keep from joining the ranks of failed companies that implemented reverse splits as a last-gasp effort to save their stocks.
Image source: Frontier Communications.
Smart Sand stock gets rocked
Smart Sand stock sank 15% on another terrible day for energy markets. Oil prices dropped more than $1 per barrel, leaving crude just above the $44 mark. That's bad news for fracking sand companies like Smart Sand, because lower oil prices make it less profitable for producers to drill and operate wells, leading to reduced demand for the materials necessary to continue production. U.S. producers have thus far been reluctant to cut production, but some industry experts expect that to happen soon, and that sent shares of most fracking sand providers down today. Combine that anticipated drop in demand with rising levels of supply among Smart Sand's rivals, and you have a recipe for sharply weaker prospects for the entire industry going forward.
Eldorado looks less golden
Finally, shares of Eldorado Gold fell more than 5%. The gold miner was just one of many precious metals companies that declined in light of the positive jobs report, and gold prices dropped more than $11 per ounce to end at $1,212, perilously close to the psychologically important $1,200 level. Eldorado has been aggressive strategically in recent months, making deals to increase its exposure to riskier development-stage mining projects. That philosophy can pay off in the long run if precious metals recover from their recent slump, but Eldorado has to be careful that it doesn't make such large bets that it can't weather a sustained period of falling gold prices before things turn around for the industry.
