Image source: Blue Buffalo Pet Products.
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Tuesday was a down day for the stock market, which gave up all of its gains from Monday as the ongoing whipsawing of public opinion continued. After having bounced back on Monday, major market benchmarks fell sharply today, with declines of around 1% to 1.5% coming as investors reassessed the potential for an interest rate increase at the Federal Reserve's next meeting later this month. Some market participants think that a correction is overdue, and a hawkish stance from the Fed's monetary policy committee could be the catalyst to send stocks lower. Some individual stocks contributed disproportionately to the declines, and Petroleo Brasileiro (NYSE: PBR), Blue Buffalo Pet Products (NASDAQ: BUFF), and U.S. Steel (NYSE: X) were among the poorest performers on the day.
Petrobras gets a downgrade
Petroleo Brasileiro sank 9% on a combination of a poor day for the energy market overall and a downgrade from an analyst firm. Oil performed badly, falling below the $45 per barrel mark and once again reversing the hopes of those who have been patiently waiting for crude to get back to the $50 level in a sustainable fashion. In addition, analysts at Tudor Pickering downgraded the Brazilian oil giant from buy to hold. Given the volatility in the oil market as well as the political turmoil plaguing Brazil, Petrobras has a number of factors that could hold it back even if its peers elsewhere are able to regain some of their lost ground.
Blue Buffalo investors sell out
Blue Buffalo Pet Products dropped 7% after it announced that a group of its shareholders would sell a portion of their stock holdings in the pet-products specialist. A secondary offering will include 14.3 million shares of Blue Buffalo stock, worth about $350 million at current prices. Because the offering is entirely composed of holdings from existing shareholders, Blue Buffalo won't receive any proceeds from the sale. Nevertheless, some investors are unhappy at the implied vote of no confidence from some parties that were first to realize Blue Buffalo's potential early in its existence.
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U.S. Steel melts down again
Finally, U.S. Steel fell 6%. The steel-maker got good news late yesterday from the International Trade Commission, which found that it was appropriate to charge duties on hot rolled coil steel from seven different countries because of allegations of dumping. Nevertheless, investors seemed to focus instead on what they believe could be a big hit to its fundamental business if the Fed moves forward with interest rate increases. Given how dependent the construction industry is on financing, any increase in interest costs could dissuade developers from moving forward with planned projects. That would be potentially problematic for U.S. Steel, which has already had to deal with poor economic conditions in most areas of the world and can ill afford to deal with a U.S. slowdown as well.
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