Why Kinross Gold, Yamana Gold, and Wheaton Precious Metals Slumped Today

The stock market had an unprecedented celebration on Wednesday, with the Dow Jones Industrial Average soaring more than 1,000 points and other major indexes following suit with similar-sized percentage gains. After weeks of falling stock prices, investors were ready to embrace at least the possibility of a recovery, and nearly every sector of the financial markets showed solid gains. But one clear laggard was the mining industry, where Kinross Gold (NYSE: KGC), Yamana Gold (NYSE: AUY), and Wheaton Precious Metals (NYSE: WPM) were notable for being some of the only losers on the day. Here's what sent these stocks lower.

What goes up must come down

To understand why these three stocks suffered declines on an otherwise positive day for the market, it's important to get some context. Coming into today's session, all three of these companies were up between 15% and 25% in December, compared to a 15% drop for the S&P 500. Precious-metals stocks often act as a defensive play during times of market turbulence, and gold prices had held up quite well even when stocks and other financial markets were plunging.

Moreover, these stocks in particular were positioned well to benefit from recovering prospects for precious metals. Kinross spent much of the first part of 2018 dealing with falling production projections that offset efficiency gains in its operational cost structure. Yamana was having trouble with its key Cerro Moro mine in Argentina, where ambitious expectations for a production ramp-up fell prey to export taxes and political pressures. And Wheaton, which doesn't mine gold and silver but rather provides financing for miners in exchange for the right to purchase streams of precious metals at discounted prices, had seen price weakness in the gold and silver market affect its cash flow adversely. Better bullion prices helped all three of these stocks, and a favorable tax decision for Wheaton only added to the bullish sentiment.

Today, though, the fear that sent investors into gold suddenly reversed itself. Gold prices were down modestly on the day, and the idea that less-defensive stocks were a good place to invest again took interest away from these three stocks. Declines of 3% to 5% were modest, reflecting the overall enthusiasm of the day, but they still stood out amid the thousands of winning stocks.

The stock market's explosive one-day move higher isn't an all-clear sign, though, and investors would be wise to keep their eyes on stocks like Wheaton, Yamana, and Kinross. If a more defensive tone returns to the market, then these stocks could easily see a return to their stronger performance from earlier in the month.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.