Over the past few weeks, Russian President Vladimir Putin proved to the world that he has the power to roil global markets, erase decades of diplomatic progress with the West, and begin to ruin Russia's economy all by himself. Few individuals wield more influence right now than the Russian leader, but Janet Yellen, head of the Federal Reserve, is one of them. And Yellen's remarks on Wednesday, which hinted at interest rates rising sooner than expected, sparked an immediate reaction on Wall Street. Seven in 10 stocks fell, and Consolidated Edison (ED 0.56%), Newmont Mining (NEM 0.21%), and Alexion Pharmaceuticals, (ALXN) finished as the worst performers in the S&P 500 Index (^GSPC 0.97%), which lost 11 points, or 0.6%, to end at 1,860.
Shares of Consolidated Edison, a diversified utilities company in the Northeastern U.S., lost 3.2% in the stock market today. Investors can take solace in the fact that utilities almost always have a rough time when interest rates rise, as they did today. That's because people who invest in utilities tend to be conservative, and often are primarily lured by the high dividends (Consolidated Edison pays a 4.6% annual dividend). When interest rates rise or are expected to rise, so do bond yields, providing an attractive alternative to dividend stocks.
Newmont Mining, which produces gold, copper, and silver, saw shares shed 3.1% on Wall Street today. Two of those three commodities fell today, including the price of Newmont's specialty, gold. Again, Yellen showed her unique ability to influence the universe of investments, as her pre-emptive efforts to curb inflation by raising rates made gold, an inflation hedge, less attractive. With a longer-term view in mind, China's gradually slowing economy is a huge concern for Newmont Mining, and much of the company's fate rests in the hands of Chinese demand.
Finally, shares of Alexion Pharmaceuticals, dipped 2.8% in trading today. The only predicate for the sell-off was the sorry state of the stock market at large Wednesday, and perhaps the fact that Alexion has soared to meteoric heights in recent times. It's nothing less than a one-way gain-train for investors wise enough to invest in the company a few years ago. From 2009 to 2013 Alexion's sales rocketed from about $380 million annually to over $1.5 billion per year, all on the success of Soliris, a genetic blood disorder. Soliris stands alone at the time being, facing no competition in its treatment area now, but this lack of competition could also be sending the stock to heady levels, so, as always, caveat emptor.
