Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
Dow 16,000 and S&P 1,800 turned out to be intraday events only on Monday, as markets fell steadily from their early gains. The S&P 500 and Nasdaq actually turned negative on the day, and the Nasdaq's loss of almost 1% reflected losses in several major momentum stocks. Tesla Motors (NASDAQ:TSLA), Yelp (NYSE:YELP), and SUPERVALU (NYSE:SVU) were all posed severe losses of as much as 10%. Let's take a closer look at why these stocks dropped so much today.
Tesla dropped more than 10%, hitting its lowest level since July as the automaker faces an investigation at its Model S plant in California following an accident there that injured three workers. Combined with multiple incidents of fires following car crashes, Tesla has faced an unusual amount of negative publicity, and that has erased the momentum that the electric-vehicle manufacturer carried throughout so much of 2013. With potential shareholder lawsuits possibly coming in the near future and word pending on whether Tesla will have to recall vehicles, investors need to prepare for more volatility.
Yelp declined 9% in sympathy with other social media websites, including Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR), both of which dropped 6.5%. As with Tesla, Yelp and its social brethren have been among the biggest gainers recently, with Yelp having quadrupled so far in 2013 on the perceived promise of its restaurant and services review service. Yet as nervous investors start looking for reasons that the stock market could correct, high-flying stocks like Yelp are natural targets for taking profits to preserve hard-won gains this year.
SUPERVALU also fell 9%, with Goldman Sachs downgrading the grocery retailer. Among potential downsides that Goldman cited were cuts to the food-stamp program, which could affect the amount of discretionary income shoppers have to buy food from its store chains. Given the fragility of SUPERVALU's recovery after its massive split-off from many of its former chains, including Albertson's and Osco, it's reasonable that shareholders are pulling back from the stock, which is still up 150% on the year.