Tuesday largely involved the stock market marking time, consolidating big gains from Monday's session as investors apparently resisted the temptation to take profits after the Dow climbed above the 18,000 mark yesterday for the first time in nine months. Among blue chip stocks, favorable earnings reports in the healthcare and health insurance space helped lift major market benchmarks, and solid performance in the oil market offset concerns from the technology sector about the ability of well-established tech giants to adapt to changing conditions in the industry. Even though most broad-based measures of the market rose, several stocks gave up ground. Among the worst performers were Viacom (VIAB), MGIC Investment (MTG 2.43%), and Rambus (RMBS -0.41%).
Viacom fell 8% after concerns grew about the company's ongoing negotiations with DISH Network to continue carrying Viacom channels like Nickelodeon, Comedy Central, and MTV. The media giant said that DISH "has not engaged in a serious way to reach an agreement for Viacom's number-one family of cable networks," and Viacom cited 10 instances in which it alleged that DISH derailed negotiations through bringing issues to the public rather than having productive sessions between the two parties. The tension heightens the increasingly difficult situation that content providers face in negotiating with cable and satellite TV companies, given that both face competition from streaming-video service providers that could crush their respective business models. If a negotiation ever fails completely, then it will be a game-changer for the entire industry, and that could be bad news for both DISH and Viacom.
MGIC Investment dropped 9% in the wake of its first-quarter earnings report. The mortgage insurance provider saw its revenue and net income per share drop by nearly half, missing the consensus forecast among investors. CEO Patrick Sinks pointed to some of MGIC's more favorable trends, including "adding high quality new insurance, continu[ing] to experience positive credit trends, and maintain[ing] our traditionally low expense ratio." Nevertheless, overall new insurance written fell about 8% from year-ago levels, and although the percentage of loans delinquent fell by about a quarter, the percentage of insurance still in force from a year ago fell below the 80% mark. The more important question for long-term investors in MGIC is whether the housing market will sustain its recent health, because worsening conditions could put more financial strain on its insurance operations and create new problems for the company.
Finally, Rambus also declined 9%. The semiconductor technology provider reported its first-quarter results Monday afternoon, and even though revenue inched downward and net income dropped by three-quarters from year-ago levels, Rambus performed better than many investors had expected. However, Rambus said that it expects revenue of between $72 million and $77 million in the current quarter, and that was well below the nearly $79 million in sales that shareholders were hoping to see. Security technology development projects added some revenue for Rambus, but weakness in patent and technology royalty revenues could create an ongoing drag on the company's top line if Rambus can't find ways to keep growing its business and finding new customers for its software and licensing.