Investors finally had to deal with a pullback on Wall Street, as major market benchmarks gave up a portion of their hard-earned gains from earlier in the month. The Nasdaq Composite (^IXIC +0.36%) took the biggest hit, falling nearly 2%, but the S&P 500 (^GSPC +0.26%) and Dow Jones Industrial Average (^DJI +0.24%) were also significantly lower on the day.
|
Index |
Daily Percentage Change |
Daily Point Change |
|---|---|---|
|
Dow |
(0.77%) |
(261) |
|
S&P 500 |
(1.30%) |
(53) |
|
Nasdaq |
(1.96%) |
(228) |
Data source: Yahoo! Finance.
A couple of stocks were noteworthy detractors from the Dow's performance on Monday. Johnson & Johnson (JNJ 1.73%) got some bad news about its attempts to try to limit its liability in some potentially dramatic litigation, forcing it to use another strategy to look to mitigate future risk. Meanwhile, Chevron (CVX +1.75%) continued to pull back following the release of its fourth-quarter financial results last week.
No bankruptcy protection for J&J's talc business
Shares of Johnson & Johnson finished lower by 4%. The healthcare conglomerate had sought to follow a novel strategy to limit potential liability from one of its popular consumer products.
For more than a decade, Johnson & Johnson has faced lawsuits alleging that its talc-based baby powder contained asbestos and therefore caused the plaintiffs to get various types of cancer. In the mid-2010s, jury awards against J&J started coming in, creating the potential for total liability amounts in the billions of dollars.
NYSE: JNJ
Key Data Points
In order to try to contain that liability, Johnson & Johnson sought to create a subsidiary as a separately legal entity, into which it contributed its talc business. From there, it sought bankruptcy protection for the subsidiary, with certain financial guarantees from the J&J parent company to recognize that it couldn't just leave the subsidiary unfunded.
On Monday, the Third Circuit Court of Appeals dismissed the subsidiary's bankruptcy filing, finding that Johnson & Johnson's intent was purely to seek bankruptcy protection rather than out of any legitimate business purpose. Moreover, because J&J was poised to backstop the subsidiary financially, the federal appeals court found that the subsidiary itself wasn't in financial danger.
J&J will fight the ruling, but if it isn't successful, the healthcare company will face uncertainty for years to come. Shareholders clearly don't believe the entire company is in danger, but today's move in the stock price still shows that the litigation is somewhat important to investors.
Chevron keeps falling back
Shares of Chevron fell 3% on Monday, dropping further from a 5% decline last Friday. The oil giant's fourth-quarter financial results spurred the move lower for the stock price last week, but today's further declines seemed tied to energy markets more broadly.
Prices of crude oil moved lower by nearly $2 per barrel, falling below the $78 level and representing a nearly 2.5% decline. Even though various sanctions have sought to punish Russia for its invasion of Ukraine, exports of Russian crude have continued to come on to the global market, boosting overall supply. Moreover, some investors are concerned that further interest rate increases from the Federal Reserve could weigh on commodities markets and investment in additional production.
NYSE: CVX
Key Data Points
Falling prices could give the big oil stock a chance to implement its recently boosted buyback program. Earlier last week, Chevron shares had soared, as the company's board of directors approved up to $75 billion toward repurchases, or roughly 20% of Chevron's market cap.
Even at current oil price levels, Chevron could sustain strong profits for years to come. Yet, with the stock having more than doubled in the past two years, there are a lot of assumptions already baked into Chevron's share price.
