Apple shares are down 24% from their 52-week high. (Photo: Mark Lennihan, AP)
Wall Street's post-election stupor is turning into real a headache
for some stocks, as many well-known and even ballyhooed names fall into
bear market territory.
Stocks fell by triple digits again
Thursday, yanking the Dow Jones industrial average down 434 points over
the two days after the election to 12,811. While the Dow is down just 6%
from its 52-week high, certain stocks are suffering more serious pain.
a quarter of the stocks in the Standard & Poor's 500, 122, are now
in a bear market. A bear market is unofficially defined as a 20% decline
from a recent high. Some of the stocks pulled into bear markets include
marquee names such as burrito chain Chipotle, energy drink maker Monster, video rental service Netflix, apparel maker Nike and alternative energy firm First Solar.
The starkest example: Apple,
which has been getting hammered since late September. The stock is now
down 24% from its 52-week high. "With momentum stocks, everyone gets
talked into this being the next big thing," says Kim Caughey Forrest of
Fort Pitt Capital. "Sometimes, they get it wrong."
While it's too soon to read too much into the bear-market treatment some stocks are getting, investors are taking note of:
-- Leaders tumbling. Given
the fact all the major indexes had double-digit percentage gains
earlier this year, investors were prepared for a pullback, says David
Sowerby of Loomis Sayles. But the vicious selling, in many cases, is
hitting the stocks that were big winners and seemingly immune, he says.
Often when winning stocks stumble, they "don't have a hiccup, but a
large belch," he says.
-- The Apple factor. There's no
dispute that Apple has been the market's de facto leader. The stock is
so widely held, it's become the top holding of many individual
investors, and accounts for roughly 5% of the value of the S&P 500.
Seeing this market giant stumble gives investors pause, says Paul Hickey
of Bespoke Investment Group. Nervous investors who piled into market
leaders such as Apple are getting spooked and bailing in droves, says
Brett Golden of market information firm, ChartLabPro.
-- Tax fears.
Investors might not like uncertainty, and having the election resolved
takes care of that. But investors also don't like higher taxes, which is
a definite risk as President Obama and Congress remain at loggerheads.
Investors are looking at the strong possibility of higher tax rates on
gains from investments. Some investors are reacting by selling winners
now and locking in 2012 tax rates, rather than holding and facing higher
tax rates later, Hickey says.
Sowerby says investors can use the
current bear market in individual names to scoop up shares of beat-up
former leaders at a discount. But Golden says leaders plunging into a
bear market might simply be coming back down to where they belong as
euphoria wears off. These stocks "are ticking time bombs if they don't
keep the growth coming," he says.