The stock market's recent upward bounce has restored investor confidence to a large extent, but Tuesday showed that the market doesn't move straight up forever. Investors responded negatively to news from China that trade activity was below expectations, and the drop in the price of oil also weighed on the positive sentiment that crude's big bounce from its lows earlier in the year had produced. Among the hardest hit stocks on the day were Lumber Liquidators (LL 5.13%), Vivint Solar (VSLR), and Navistar International (NAV).
Lumber Liquidators fell 15% in response to news that hedge fund manager Whitney Tilson had chosen to sell the stock short once again. Tilson had maintained a bearish position on the flooring specialist for more than two years before closing out the position last December. However, the hedge fund manager said that new reports of possibly increased cancer risk from the company's products prompted him to make the decision to reopen his short position. Tilson believes that there are coin-flip odds that Lumber Liquidators might need to file for bankruptcy protection in the long run, and outstanding regulatory issues are likely to hamper any chance for the stock and its business to recover quickly. Add that to the negative publicity that the company has received, and it will be a huge challenge for Lumber Liquidators to bounce back from the onslaught of bad news.
Vivint Solar dropped 20% after putting an end to its planned merger with solar peer SunEdison. The company said in a press release this morning that it had delivered a letter to SunEdison claiming that SunEdison had failed to meet obligations under its merger agreement, and Vivint claimed that it reserved all rights for remedies under the contract. Unfortunately, the announcement seemed to do SunEdison far more good than Vivint, because SunEdison's stock actually rose on the day. The problem for Vivint is that concerns about the residential solar industry in the U.S. persist, and so the company could have trouble finding customers interested in its solar leasing and power-purchase agreement model going forward. Until Vivint figures out its new strategic direction, the stock is likely to remain volatile.
Finally, Navistar International declined 12%. The maker of trucks, engines, and related components released fiscal first-quarter results this morning that included a net loss of $33 million and a 27% plunge in revenue compared to its year-earlier quarter. Navistar said that its markets were weak nearly throughout its geographical footprint, pointing to soft industry conditions in the U.S. and Canada, dollar-led volume declines in Mexico, and weak economic conditions in Brazil. Some of the sales declines came from internal decisions to discontinue its Blue Diamond Truck joint venture, and the company emphasized its increase in adjusted pre-tax operating earnings. However, investors remain impatient with the pace of the turnaround efforts at Navistar, and as long as worries about emerging-market economic growth continue, the truck manufacturer could have trouble convincing investors that its turnaround is on track.