Just the other day I remarked how often the Dow Jones Industrial Average got saved by late-afternoon rallies that limited the damage done during the day. Yesterday, however, the index flipped the script, and despite ending the day 60 points higher and hitting a new all-time record of 14,673, it was actually a late-afternoon sell-off that kept the Dow from finishing even higher.
While the gains in the index were broad and deep, the few losses recorded on the day were rather shallow, the worst being the 0.6% loss by Proctor & Gamble. Yet consumer products in general were soft as Clorox, Colgate-Palmolive, and Kimberly-Clark all closed down, though each by less than 1%.
Consumer confidence was buffeted in March as those who thought the economy was in good to excellent shape fell to 18% of respondents in the Discover U.S. Spending Monitor survey, while those who rated it fair increased to 34%. Half of those surveyed, however, expect the economy to worsen, and unsurprisingly those who made $75,000 or more a year thought things were better than those making less. The Bloomberg Consumer Comfort Index was also still in negative territory, even if it was above its lows.
It's in the genes
Elsewhere in the market, however, Affymetrix (AFFX.DL) tumbled more than 13% after preannouncing first-quarter earnings that missed even its own expectations. It blamed "headwinds" in its gene expression business everywhere it does business, though it suffered a particular shortfall in Japan. The Fool's Sean Williams thinks that may indicate more than a one-off performance issue because of the global nature of the miss Affymetrix suffered.
Competition has been fierce among gene sequencing firms, but for the right players, business has been good. Life Technologies (NASDAQ: LIFE) is being wooed by a number of suitors, including a bevy of private equity firms along with Thermo Fisher who all want access to Life's leading genetic sequencing equipment. Bids north of $11 billion are expected, which is said to be the biggest buyout in the space since Thermo Electron bought Fisher Scientific for almost $13 billion in 2006 to create Thermo Fisher.
That may end up being one hope for Affymetrix investors, that it ends up getting a bid from one of the losers in the process or still others looking to break in. Illumina was approached by Roche last year, but the pharma giant wouldn't raise its $6.8 billion offer and walked away, while Danaher was said to have at least a passing interest in Life Technologies.
Although Affymetrix's shares are up 26% so far in 2013, yesterday's sharp decline puts them 25% below their 52-week high. That may make it vulnerable, and with a global slowdown in its business, perhaps an attractive alternative.
For retailer J.C. Penney (JCPN.Q), yesterday's 12% drop in its stock was a result of the manic way in which the company seems to respond to crises these day. This time it was dumping CEO Ron Johnson, who presided over the disastrous change in pricing strategy that drove away its customers in droves, and bringing back former CEO Myron Ullman, an acknowledged turnaround expert, but one who had been unable to get Penney's going the last time he was at the helm.
Indeed, it was the need to shake the venerable retailer out of its torpor that led activist investor Bill Ackman to choose Johnson in the first place to come in and shake things up. That he did, though not in a way anyone expected. While there were many skeptics about Johnson's ability to translate the Apple experience from whence he came to a stodgy retailer, private equity investors aren't exactly long-haul holders of a stock, and they desire a quick fix.
As has been endlessly dissected, Johnson changed Penney's from its traditional door-buster-sale mentality to an everyday-low-price strategy, but customers instead chose to fool themselves into thinking they were getting a deal and shopped instead at rivals Kohl's and Macy's, which still employ that pricing plan. While Johnson did at last throw in the towel this year on his strategy, the board of directors apparently decided it was time a new, new face -- which is really an old face -- was needed.
That lack of stability is worrisome to the markets, as it projects incoherence in strategy. Despite his bona fides in retail, I'm not sure Ullman is the man for the job, because he wasn't able to execute previously either. The markets apparently agree.