Why Wells Fargo, Advanced Micro Devices, and Alkermes Slumped Today

MarketsMotley Fool

Wall Street experienced another terrible day on Monday, with major benchmarks seeing even bigger losses than they had during the previous session. The Dow Jones Industrials fell more than 1,100 points as fears about the future of the bull market in stocks persisted, and many market participants sought to cash in their gains from the past several years in an effort to avoid losing a bigger portion of their profits. Some individual companies also suffered for reasons specific to their operations. Wells Fargo (NYSE: WFC), Advanced Micro Devices (NASDAQ: AMD), and Alkermes (NASDAQ: ALKS) were especially noteworthy decliners on the day. Below, we'll look more closely at these stocks to tell you why they did so poorly.

Wells Fargo takes a hit from the Fed

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Shares of Wells Fargo dropped 10% after the bank got a huge punishment from the Federal Reserve. The Fed said that as a consequence of the customer service incidents that Wells Fargo has seen over the past year, the central bank will not allow Wells Fargo to grow its asset base above what it had on its books as of the end of 2017. The limit will remain in place until Wells Fargo takes steps that represent "sufficient improvement" in the eyes of central bankers. The move is unprecedented and puts an additional cloud over Wells Fargo, which some had hoped would be able to put the scandals behind it and concentrate on growth. Now, Wells Fargo could get left behind if the rest of the industry can take greater advantage of new opportunities in the current environment.

AMD deals with volatility

Advanced Micro Devices stock fell 7% as investors apparently wrestled with the competitive pressures that the chipmaker is facing right now. On one hand, AMD has done a good job of keeping its peers in the industry at bay, finding ways to carve out lucrative niches in key markets like gaming and cryptocurrency-friendly processing chips. Yet now that bitcoin and other cryptocurrencies have seen their prices fall dramatically, some shareholders fear that AMD could be vulnerable to a reversal in the industry's surge. Advanced Micro has performed well lately, but any signs of deterioration could lead to further swift declines.

Alkermes reverses course

Finally, shares of Alkermes fell 12%. The biotech stock had seen a big move upward on Friday, as some market participants speculated that a buyer might be interested in picking up some of its more promising assets. Consolidation in biotech is a growing trend, and Alkermes has a stable of interesting candidate drugs that might be attractive to a would-be acquirer. Yet the failure of any follow-through over the weekend, combined with the overall market's swoon, seemed to lead investors to think twice about the prospects for a takeover. Given concerns about the broader market, would-be acquirers might think twice before making a major asset purchase, and that could leave Alkermes on its own as an independent company for the foreseeable future.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alkermes. The Motley Fool has a disclosure policy.

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