If the bailout of Spain's banks -- the Spailout, as it's now being called -- was supposed to calm nerves, Europe needs to review its playbook. Sure, the markets surged last week in hopes that it would, but the reality of the massive bailout caused the Dow Jones Industrial Average to tumble 143 points yesterday as traders wondered if Europe's pockets were deep enough to bail out Spain itself and not just its banks. And Italy, too. And what does happen if Greece leaves the eurozone?
While I still see the continuous rounds of bailouts eventually ending badly, some stocks are doing worse now, going in the other direction and falling by nearly double-digit percentages. So first let's see whether they had good reason to drop, as panic-fueled declines can sometimes make for excellent buying opportunities.
A revolving door
Nuclear-waste remediation specialist EnergySolutions (NYS: ES) ought to have bright prospects, despite the heightened risks following last year's Fukushima reactor disaster. China continues to invest heavily in the alternative-energy source, and even countries like Germany that are looking to go nuclear-free within a decade still need a way to dispose of their waste they currently produce.
Recent Nuclear Regulatory Commission approvals for Southern Company (NYS: SO) and Progress Energy to build new nuclear reactors -- the first time in decades this has happened -- suggest this could be the dawn of a new day for the nuclear energy industry and those who service it.
Yet EnergySolutiuons' stock suffered a meltdown yesterday, falling 55% after the company ousted its CEO and said the guidance it had provided just last month was too high. While the old CEO will remain a "strategic advisor" to the company, it's clear there's way too much confusion here to say the stock's precipitous fall yesterday is over. It may have bounced up a little in early trading this morning, but companies don't typically jettison members of senior management like that, at least not ones who have a grip on their situation.
Tell me on the EnergySolutions CAPS page or in the comments section below if you agree it's too early to wade in here, then add its stock to the Fool's free stock-tracking service to watch for the right time to light up the stock again.
It was building up over the weekend as analysts from different investment firms weighed in on the prospects of steelmaker AK Steel (NYS: AKS) and investors scrambled for the exits when the markets opened.
The main thrust of the downgrades was weak steel prices that probably have further to fall as China hits record production levels. Last year the Obama administration risked a trade war with China when it imposed tariffs on Chinese steel imports, and the U.S. International Trade Commission wants to impose even greater anti-dumping duties on them to protect U.S. steel interests.
With the World Steel Association saying production in April rose only 1.2% compared with a year ago, Chinese exports flooding the market will only pressure prices further. They were down almost 2% in May. Recently I reported that Ternium was suffering from shipments falling from the year-ago period as well, so a trade war is the last thing the industry needs at this point.
With Europe in a recession due to the sovereign debt crisis, uncertainty surrounding whether more countries will need a bailout, and growth in China coming in for a harder landing than previously expected, investors are worried the global economy is going to sink, and that's not conducive to steel's expansion.
Yet 91% of the nearly 950 CAPS members rating AK Steel believe it will be able to bounce back and beat the broad indexes. Have your say on whether you think AK can survive a global recession and a trade war in the comments section below, then add the steelmaker to your watchlist to see whether any more shoes drop to send it down further.
Ready for a resurrection
These stocks might be in turmoil, but if you think the energy sector is still the place to be, check out this explosive free report from The Motley Fool on the energy industry and its best prospects -- it's free but only available for a limited time, so click here today.
At the time thisarticle was published Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Arcelor Mittal and EnergySolutions. Motley Fool newsletter services have recommended buying shares of Southern. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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