The bloodbath on the Dow Jones Industrial Average yesterday, which suffered its worst day yet this year, plunging 266 points, or 1.8%, was broad-based, with every stock on the index ending up in the red, meaning the best stocks to buy were not to be found on the Dow. But with Wal-Mart's stock averting an implosion and ending the day barely unchanged, and Procter & Gamble down about a half percent, an argument could be made that consumer-facing companies held up best.
Yet telecom presented an interesting avenue of attack, too, as Verizon (VZ 0.59%) had the second "less bad" performance of Dow components, pulling back by less than half of a percent. That was no doubt largely in response to a two-fold development: its willingness to pay $1.5 billion for Clearwire's (NASDAQ: CLWR) spectrum and DISH Network's (DISH 3.55%) offer to buy Sprint Nextel (S) for $25.5 billion.
Sprint, of course, is still the majority owner of Clearwire, which it is trying to acquire whole, and is itself now in the midst of a bidding battle as DISH's offer trumps the previous $19 billion bid by Japan's Softbank. The holy grail that everyone is seeking is spectrum.
Softbank is looking to build out a network, and if it can acquire Sprint -- and Clearwire in the process -- it will have a ready-made system that it can launch immediately at lower cost. Spectrum is also the underpinning of T-Mobile's bid for MetroPCS.
Yet Clearwire is clearly in need of some sort of salvation, as it says bankruptcy is the ultimate outcome if the Sprint deal isn't consummated. But there are big shareholders who say Sprint needs to pay up for the privilege, or else its spectrum needs to be sold. Verizon, which is amassing a portfolio of spectrum assets, would love to add Clearwire's to it, but there could be regulatory hurdles too high for it to clear. One thing is certain: With all the moving parts at play, it becomes less clear who will come out on top.
While the market carnage and the decimation of precious metals were the big stories yesterday, one that's been building over time is the spread of avian flu in China and the potential for it to unleash a pandemic on the world. So far, dozens have been infected and 13 people have died from the new virus strain, H7N9.
Troubling is that it's a new presence in humans, and while that makes its spread among the populace difficult, scientists fear that it's gaining momentum. Sinovac Biotech (SVA), which was approved to produce vaccines several years ago, jumped almost 7% yesterday as it gears up to mass produce a vaccine to combat the new threat.
People remember the panic caused by the development of the H5N1 virus, and scientists believe the H7N9 strain is much more serious, as it has spread between Beijing and Shanghai -- a distance of some 750 miles -- without leaving a telltale trail of illness or death behind it. Birds and poultry are not becoming obviously sick, making it difficult to track, while patients are now contracting it without exhibiting any of the usual symptoms.
World health officials sounded the alarm a few years ago about global pandemic and people dying in the streets, and it all amounted to nothing. As fear and hysteria mount this time, the greatest risk is that people end up ignoring the warnings health officials give. Because they become more alarmist each time in an attempt to get more people to listen -- and then it doesn't pan out as expected -- they cause the exact opposite reaction in those they target for the message.
Yet investors can be assured that Sinovac will capitalize on the outbreak. Further, because the development of vaccines merely requires the swapping in and out of various strains of the virus, it doesn't have to go through a whole new testing procedure, so it ought to be better prepared to meet the coming demand.