While the market spent the bulk of the first day of the year relatively deep in the red, when push came to shove, the bulls managed to break even for Friday despite the 0.3% slowdown in construction spending and the modest lull from the still-positive ISM Index.
Not every stock finished the session on a high note, however. Melco Crown Entertainment Ltd (MPEL), DeVry Education Group Inc. (DV), and Petroleo Brasileiro Petrobras SA (PBR) got into the red early on, and could never fight their way out of the hole. Here’s what investors need to know.
Melco Crown Entertainment (MPEL)
Not that it was the only casino name to struggle on Friday, but Melco Crown Entertainment certainly led the charge, with MPEL stock falling 5%.
The bulk of the reason for the group’s weakness was yet another report of casino woes in Macau. Barron’s posted a story on New Year’s Day pointing out that gaming revenue slumped 30% on a year-over-year in December, which was the sharpest monthly slide for all of last year, and topped off a seventh straight month of declining gaming revenue.
The gambling enclave is struggling in the shadow of a regulatory crackdown on gambling, and other nefarious activities that gambling can facilitate.
MPEL stock is particularly vulnerable to regulatory scrutiny, as the bulk of Melco Crown Entertainment casinos and properties are in and near Macau.
DeVry Education Group (DV)
On Monday of this week, DeVry Education Group shares were hitting new 52-week highs, hinting a major recovery was already underway. Since then DV stock has fallen more than 10%, with nearly 7% of that slide materializing today.
The odd part about the pullback: It didn’t unfurl on any major news.
Realistically, part of the weakness since early this week can be attributed to profit-taking. Some investors were looking to shed their DeVry Education Group in tax-year 2014, while others waited until this tax-year to lock in their gains. Whatever the rationale for the timing of the exits, it’s clear the market isn’t looking for another big bullish year from DV stock.
Petroleo Brasileiro Petrobras (PBR)
As if crude oil’s implosion wasn’t devastating enough to explorers and producers like Petroleo Brasileiro Petrobras, salt was poured in the wounds today when it was announced Brazil President Dilma Rousseff would be turning up the heat on an anti-corruption effort that has already put Petrobras dead in its sights.
It was recently uncovered that several of the nation’s politicians had received as much as $3 billion worth of kickbacks from state-run Petroleo Brasileiro Petrobras. The allegation is that contractors and company executives overcharged for services and then distributed the overages to individuals as campaign contributions or outright bribes.
True or not, and embellished or not, the mere appearance of impropriety was enough to send PBR stock more than 7% lower.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
