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.
Bullish economic news helped the Dow finally hold onto the 16,000 level at the end of the day, even after three previous forays had failed to result in a close above that figure. Even amid the general enthusiasm over stocks as the year draws to a close, GameStop (NYSE:GME), American Railcar Industries (NASDAQ:ARII), and Tower Group International (UNKNOWN:TWGP.DL) all fell sharply. Let's figure out why these stocks dropped so badly and what their moves could mean for the broader market.
GameStop dropped 7% as investors focused on disappointing projections for its fourth-quarter earnings. Although same-store sales soared more than 20% in the third quarter on an overall 18% revenue gain, GameStop gave a range of earnings guidance that was below the current investor consensus. The big wildcard, though, is that with new consoles becoming available for this holiday season, it's hard to project just how big customers' appetites for the new offerings and the games to go with them will be.
American Railcar Industries also fell 7% as analysts at Raymond James downgraded it and several other railcar companies. The analysts cited concerns that huge demand for tank cars to ship crude will lead to overproduction, which in turn could lead to weaker pricing in the future. In the long run, the big question will be whether a bounce in the commodities markets will boost demand for nontank cars soon enough to offset any weakness in the tank-car segment. Competition is likely to get fiercer in the years to come as well.
Tower Group International declined 6% after receiving notice of potentially getting delisted from the Nasdaq exchange. The company said earlier this month that it would have to restate its financial statements for its 2011 and 2012 years, and the Nasdaq letter that Tower received pointed to the fact that the company hasn't filed a quarterly report for the September quarter as the basis for its determination. The Nasdaq already gave the company until November 29 to file its June-quarter report, so it's likely that Tower Group will get another extension for the September quarter as well. Nevertheless, shares have plunged more than 80% since late July, and it's uncertain whether the insurance company will be able to get back on its feet anytime soon.