Dow Slumps 117 Points; Zulily, Melco Crown Entertainment Get Pummeled
With all eyes on the beginning of corporate earnings season and investors awaiting guidance from the Federal Reserve tomorrow, the stock market was decidedly bearish today. Like the outcome of the Germany-Brazil World Cup match today, the fate of the markets was more or less clear from the get-go. While Germany railed off five straight goals in a matter of thirty minutes, stocks started deeply in the red and never looked back. The Dow Jones Industrial Average posted a second-straight day of losses, plunging 117 points, or 0.7%, to end at 16,906.
Wal-Mart was one of just three Dow stocks to finish in the black, adding 0.8% on Tuesday. Much of Wal-Mart's success today can be directly attributed to an outflow of investment dollars from high-risk names at the benefit of more conservative, high-yield investments. The utilities sector, for example, typically boasts high yields and consistent returns, making it a popular safe haven investment choice. True to form, the utilities sector was the only one to end in the black today. While Wal-Mart's stock pays a 2.5% dividend and is extremely low-risk, consumers are abandoning Wal-Mart for its competitors, and return on investment at the company has been plummeting for the last four years.
Casino stocks are some of the most high-flying names in the market nowadays, especially those with exposure to the world's gambling capital, Macau. While we all know the risks of putting all your eggs in one basket, it's worked pretty well for Melco Crown Entertainment and its shareholders in recent years. But with June Macau gaming revenues falling nearly 4% from May, gambling titan Pansy Ho admitting Macau faces growth concerns, and Goldman Sachs cutting its growth estimates on "high-roller" revenue this year, Melco Crown faced an uphill battle Tuesday. The stock tumbled 4.9% in trading today on the confluence of bearish indicators.
With today's sell-off coming mostly at the expense of momentum stocks and lesser-known names, Zulily's stock had a target on its back. Shares of the online, mom-facing flash-sales retailer went public last November, and have been volatility incarnate ever since. True to form, Zulily shares fell 6.7% Tuesday. While today's slump was clearly somewhat reactionary, the business is young and investors face some big risks. While revenue soared an unbelievable 87% in the first quarter, it has had some difficulty fulfilling orders, which could threaten the company's growth rate if shipping times are substantially affected as a result.
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The article Dow Slumps 117 Points; Zulily, Melco Crown Entertainment Get Pummeled originally appeared on Fool.com.John Divine has no position in any stocks mentioned. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.
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