If the bailout of Spain's banks -- the Spailout, as it's now being called -- was supposed to calm nerves, Europe needs to review its playbook. Sure, the markets surged last week in hopes that it would, but the reality of the massive bailout caused the Dow Jones Industrial Average to tumble 143 points yesterday as traders wondered if Europe's pockets were deep enough to bail out Spain itself and not just its banks. And Italy, too. And what does happen if Greece leaves the eurozone?
While I still see the continuous rounds of bailouts eventually ending badly, some stocks are doing worse now, going in the other direction and falling by nearly double-digit percentages. So first let's see whether they had good reason to drop, as panic-fueled declines can sometimes make for excellent buying opportunities.
A revolving door
Nuclear-waste remediation specialist EnergySolutions
Recent Nuclear Regulatory Commission approvals for Southern Company
Yet EnergySolutiuons' stock suffered a meltdown yesterday, falling 55% after the company ousted its CEO and said the guidance it had provided just last month was too high. While the old CEO will remain a "strategic advisor" to the company, it's clear there's way too much confusion here to say the stock's precipitous fall yesterday is over. It may have bounced up a little in early trading this morning, but companies don't typically jettison members of senior management like that, at least not ones who have a grip on their situation.
Tell me on the EnergySolutions CAPS page or in the comments section below if you agree it's too early to wade in here, then add its stock to the Fool's free stock-tracking service to watch for the right time to light up the stock again.
It was building up over the weekend as analysts from different investment firms weighed in on the prospects of steelmaker AK Steel
The main thrust of the downgrades was weak steel prices that probably have further to fall as China hits record production levels. Last year the Obama administration risked a trade war with China when it imposed tariffs on Chinese steel imports, and the U.S. International Trade Commission wants to impose even greater anti-dumping duties on them to protect U.S. steel interests.
With the World Steel Association saying production in April rose only 1.2% compared with a year ago, Chinese exports flooding the market will only pressure prices further. They were down almost 2% in May. Recently I reported that Ternium was suffering from shipments falling from the year-ago period as well, so a trade war is the last thing the industry needs at this point.
AK Steel's stock has fallen more than 40% so far this year, as have shares of U.S. Steel
With Europe in a recession due to the sovereign debt crisis, uncertainty surrounding whether more countries will need a bailout, and growth in China coming in for a harder landing than previously expected, investors are worried the global economy is going to sink, and that's not conducive to steel's expansion.
Yet 91% of the nearly 950 CAPS members rating AK Steel believe it will be able to bounce back and beat the broad indexes. Have your say on whether you think AK can survive a global recession and a trade war in the comments section below, then add the steelmaker to your watchlist to see whether any more shoes drop to send it down further.
Ready for a resurrection
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