Why Eagle Bulk Shipping, Fitbit, and Ellie Mae Slumped Today
The stock market climbed on Thursday as investors responded with enthusiasm to comments from the U.S. central bank that it is likely to pursue raising interest rates in the near future. Fed Chair Janet Yellen gave comments indicating that putting off rate increases for much longer risked creating problems, and most saw that as a sign of economic strength. Despite modest gains of as much as 0.75% for major market benchmarks, though, some stocks gave up ground. Among the worst performers were Eagle Bulk Shipping (NASDAQ: EGLE), Fitbit (NYSE: FIT), and Ellie Mae (NYSE: ELLI). Below, we'll look more closely at these stocks to tell you why they did so poorly.
Image source: Eagle Bulk Shipping.
Is the shipping bubble popping for Eagle Bulk?
Eagle Bulk Shipping plunged 23% as investors appeared to regain perspective after an aggressive upward move in stocks throughout the industry over the past several days. Eagle Bulk had seen its stock double in a single week between yesterday and the previous Wednesday in response to positive post-election sentiment that the results of the presidential election might create a new emphasis on global trade. However, those thoughts apparently evaporated today, sending Eagle Bulk and its peers sharply lower. Even with today's decline, though, Eagle Bulk is still up more than 70% so far in November, suggesting the stock could have further to fall if there is in fact no fundamental support for the upward move in the first place.
Fitbit responds negatively to "positive" comments
Fitbit fell 7% after investors took a second look at what was billed as an upgrade yesterday. Pacific Crest analysts changed their rating on the stock from underweight to neutral sector weight, arguing that despite intense competition in the wearables market, Fitbit's stock has been hit so hard that an underweight rating was no longer justified. However, a closer look at the Fitbit upgrade finds that the analyst said the stock's fair value was just $8 per share -- well below the nearly $9.50 per share the stock fetched after Thursday's close. Analyst target prices are notoriously fickle and unreliable, but investors went back to worrying today that during the important holiday season, a flood of competition could eat into Fitbit's business at a key time. If Pacific Crest is right, the stock could have further to fall.
Rising mortgage rates hit Ellie Mae
Finally, Ellie Mae lost 5%. The provider of mortgage information services was downgraded by analysts at RBC Capital Markets, which moved its rating from outperform to sector perform. Mortgage rates have spiked higher following the results of the presidential election, with the latest reading of average 30-year rates jumping from 3.57% prior to the election to 3.94% in the most recent week. Some investors are concerned that if rates start to rise, what have been healthy activity levels in the refinancing market will essentially disappear. That could have collateral impacts on Ellie Mae if its clients decide to pull back on the products and services the company provides to lenders and mortgage servicing companies. Investors will have to wait and see if the rate increases hold, or if they turn out to be just a temporary blip in the mortgage market.
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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Ellie Mae and Fitbit. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.