Why GameStop, Hovnanian Enterprises, and Ryerson Holding Slumped Today

Friday was a mixed day for the stock market; the Dow Jones Industrials fell slightly even as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite finished higher. The S&P 500's gains of about a fifth of a percent were propelled in part by favorable economic data showing that retail sales climbed by 0.6% in December, driven by strong performance in the automotive sector. Solid bank earnings were also a positive for the market, but some stocks missed out on the good news and fell sharply.

Among the worst performers on the day were GameStop (NYSE: GME), Hovnanian Enterprises (NYSE: HOV), and Ryerson Holding (NYSE: RYI). Below, we'll look more closely at these stocks to explain why they did so poorly.

Image source: GameStop.

GameStop has a tough holiday season

GameStop fell 8% after reporting its 2016 holiday sales results, which were a source of disappointment to investors. The video game retailer said that total sales for the holiday period plunged 16%, with a nearly 19% drop in comparable-store sales. GameStop attributed part of those declines to weak sales for the latest installments of the Call of Duty and Titanfall franchises, along with aggressive promotional activity on gaming consoles over Thanksgiving weekend. CEO Paul Raines tried to call out positives, noting that "we did see continued growth in our non-physical gaming businesses." Yet GameStop admits that it will have to close poor-performing stores as the gaming business increasingly goes digital, and investors aren't certain whether game-making companies will need GameStop as an intermediary in the new world of video gaming.

Hovnanian keeps slumping on housing fears

Hovnanian Enterprises dropped 7%, adding to its 10% loss on Thursday as investors continued to respond to rising anxiety about the staying power of the housing market's expansion. On Thursday, analysts at JPM Securities cut their rating on Hovnanian from market perform to market underperform, noting that the stock's big gains seemed out of line with the most likely scenarios for housing. In particular, Hovnanian hasn't taken full advantage of the housing market recovery, and it remains unprofitable with extensive debt levels. Even with today's losses, however, Hovnanian stock still trades 40% above where it was three months ago, suggesting that if investors are truly worried, shares could fall further.

Ryerson warns of losses, lower revenue

Finally, Ryerson Holding plunged 17%. The metals processor and distributor said that it expects seasonally lower revenue sequentially for the fourth quarter compared to its third-quarter results, blaming a smaller number of shipping days for the result. In addition, net losses of $11 million to $14 million are likely for the quarter. Ryerson noted that weak pricing conditions for hot-rolled carbon steel prevailed from July to October, but then rebounded in November and December, which created some margin pressure for the fourth quarter. Even though the company said that current supply conditions are favorable and momentum seems encouraging, investors instead focused on the negatives in the guidance, which included weaker demand in the food processing, agricultural equipment, HVAC, and commercial ground transportation industries. Like Hovnanian, though, Ryerson's drop only took away about half of the stock's gains since early November, leaving it with gains of roughly a third from its lowest levels of the fall.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool has the following options: short January 2017 $28 puts on GameStop. The Motley Fool has a disclosure policy.