Please ensure Javascript is enabled for purposes of website accessibility

Why Chesapeake Energy, Fiat Chrysler Automobiles, and Morgan Stanley Slumped Today

By Dan Caplinger - Feb 8, 2016 at 4:35PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

On another tough day for the Dow and S&P 500, these stocks were particularly poor performers. Find out why.


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 0.91%).

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Morgan Stanley Stock Quote
Morgan Stanley
MS
$76.75 (0.91%) $0.69
Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
CHKA.Q
Fiat Chrysler Automobiles N.V. Stock Quote
Fiat Chrysler Automobiles N.V.
FCAU

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.