Around lunchtime today, the stock market was dropping like a rock, threatening to resume a sell-off that left investors fearing a 2000-like, tech-driven market plunge. Just a few hours later, nine in 10 sectors were showing gains and things were peachy again. Although the housing market didn't perk up as expected in March, inflation rose modestly, which was a bullish enough indicator for Wall Street. Apparently PetSmart (UNKNOWN:PETM.DL), Wynn Resorts Ltd. (NASDAQ:WYNN), and First Solar (NASDAQ:FSLR) didn't get the memo: Each stock tumbled on Tuesday, even as the S&P 500 Index (SNPINDEX:^GSPC) added 12 points, or 0.7%, to end at 1,842.
PetSmart's 4% losses secured its finish as the day's worst S&P performer. Bank of America/Merrill Lynch hit PetSmart with a dreaded downgrade Tuesday, citing the company's ebbing market share resulting from rising competition. It's a dog-eat-dog world after all, with businesses constantly at each other's throats competing for business. PetSmart should know this well by now. After signing a multiyear deal to buy Martha Stewart-branded pet foods from Age Group, Martha Stewart Living then tried desperately to sell its products to PetSmart directly, circumventing the agreement it had with Age Group, the third-party seller. This is according to a lawsuit brought by Age Group in New York courts, in which PetSmart is not named as a defendant.
Analyst sentiments quite frequently act as short-term catalysts, either propelling shares skyward or sending them on their merry way to the ground. Such sentiments were not only behind PetSmart's decline today, but also Wynn Resorts, which tumbled 3.6% on Tuesday. The slump came after tightening lending conditions in China saw credit decline nearly 20% in March from the same month last year, a dip that portends lower gaming revenue in Macau, according to Wells Fargo analysts. While China's effort to curb growth represents a legitimate concern for the Macau-reliant casino industry, make sure to take upgrades, downgrades, and sidegrades with a grain of salt: analysts don't often share incentives with the common investor.
Finally, First Solar shares shed 2.8% today, even as (gasp!) there wasn't a prestigious analyst poo-pooing the stock. Forgetting Wall Street's opinion for a moment, my colleague Sean Williams identified First Solar as one of 3 stocks near 52-week highs worth selling last week. He worries that, while First Solar's business is sound, investors have been too giddy with optimism, overlooking the fact that U.S. solar power is subsidized by tax incentives that could disappear in the coming years. At the same time, China has pledged to continue its financial support of its own solar industry, raising questions about how competitive First Solar can be on a global scale.