Image: Fiat Chrysler.
Monday's stock market movements started where Friday left off, sending investors to another big drop as the Dow Jones Industrials fell as much as 400 points on continued worries about the global economy. By the close, however, those losses had moderated, and major market benchmarks ended the day down 1% to 2%. Even with that partial comeback, many stocks still posted substantial losses. Among some of the worst performers on the day were Chesapeake Energy (CHKA.Q), Fiat Chrysler Automobiles (FCAU), and Morgan Stanley (MS 2.47%).
Chesapeake Energy lost another third of its stock price on Monday on speculation that the energy company would have to take extreme measures to continue to operate. Chesapeake even felt the need to respond directly to swirling rumors among investors, stating in a press release at midday that it "currently has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders." Nevertheless, the bond market reflected the substantial uncertainty that investors have toward the natural-gas producer, and even bonds that are due in just over a month traded at a discount of as much as 30% to face value. That indicates a severe likelihood of default in the eyes of bondholders, and the stock reflected the fact that Chesapeake has a huge overhang of debt that it will have to manage effectively to be able to generate long-term profits for shareholders.
Fiat Chrysler finished down 8% after the National Highway Traffic Safety Administration released documents over the weekend that suggested a broader examination of claims about certain vehicles' transmission systems. The safety regulator's investigation now covers more than 850,000 vehicles, and 121 incidents have led to injuries in about a quarter of reports. Concerns about vehicles including certain recent models of the Jeep Grand Cherokee, Chrylser 300, and Dodge Charger centered on cases in which drivers believed they had put the transmission into park but then had the vehicle roll away because it was still in gear. One report said that the lever for shifting gears "increas[ed] the potential for unintended gear selection." The drop pushed shares to their lowest level in more than a year.
Finally, Morgan Stanley dropped 7%. Monday was a bad day for major financial institutions generally, because the specter of a bear market in stocks only adds pressure to an industry that's already dealing with falling underwriting demand, rough commodity markets, and an interest rate environment that isn't conducive to maximum profits. Some market participants also pointed to the likelihood of a Bernie Sanders victory in New Hampshire as ramping up rhetoric surrounding Wall Street institutions in a way that could adversely affect Morgan Stanley's prospects. With another round of Federal Reserve stress tests coming over the next several months, investors will want to keep an eye on Morgan Stanley and its big-bank peers to make sure that they continue to offer the investment opportunities they have in the past.
