The bulls look to be firmly in control of the stock market now.
The U.S. Federal Reserve has pivoted away from its monetary tightening regime and signaled three interest rate cuts in 2024. However, while the Santa Claus rally now appears in full swing, not every stock is celebrating as we close the year. Some stocks continue to trade sideways or are falling based on poor fundamentals, sector problems, or a lack of investor interest. With the market rally broadening, investors should shun these poor performers. Rather, they should focus on stocks that are surging ahead and setting up for a sustained rally in the New Year.
Let’s examine three S&P 500 stocks that are heading south.
Moderna (MRNA)
Rival pharmaceutical company Pfizer’s (NYSE:PFE) stock just got crushed after it lowered its guidance amid slowing sales of its Covid-19 vaccine.
Could Moderna (NASDAQ:MRNA) follow Pfizer and also lower its outlook? After all, Moderna has already announced that it’s scaling back production of its own Covid-19 vaccine this fall and winter amid weakening demand. And, it wouldn’t take much to crush MRNA stock, is already down 52% in 2023.
In September, Moderna forecast that U.S. demand for its Covid-19 vaccine will be between 50 and 100 million doses this fall and winter. That’s a significant drop from 153.8 million Covid-19 administered shots in 2022. The company said that it’s downsizing aligns with the endemic phase of the respiratory disease. So, this has led to countries around the world scaling back their vaccine orders in recent months. The bigger problem for Moderna is that, unlike Pfizer, the Covid-19 vaccine is its only commercially available medication.
Sunrun (RUN)
Solar power stocks have been terrible investments over the past two years. The excessive regulations and expense involved in having solar panels installed at a home or business has hurt the industry. Also, a scaling back of government subsidies meant to spur adoption of solar power dampened demand and cratered solar stocks.
For an example of the carnage, look to Sunrun (NASDAQ:RUN). RUN stock is down 80% from an all-time high it reached in January 2021.
While RUN stock has been bouncing higher, up 65% in the past month, it remains down 45% over the last 12 months. The Fed’s pivot to rate cuts is largely viewed as a positive for solar stocks. However, the economy is expected to fall into a recession as many economists predict. If that happens, demand for solar power among residential customers might worsen, further hurting RUN stock. Surveys show that most Americans still view solar power as an expensive luxury.
Occidental Petroleum (OXY)
Warren Buffett can buy all the shares of Occidental Petroleum (NYSE:OXY) he wants. But, that doesn’t make it a good investment. Recently, Buffett bought an additional 10.5 million shares of OXY stock worth $590 million as it hit a 52-week low recently. Buffett now owns 238.5 million shares of Occidental Petroleum worth $13.6 billion. However, the stock has been slumping as crude oil prices have fallen to $70 per barrel and the outlook for the energy sector grows cloudy heading into 2024.
Additionally, OXY stock has fallen to a 52-week low after the company announced the purchase of privately held energy producer CrownRock for $12 billion. Analysts have raised concerns about the CrownRock deal as it adds debt to Occidental’s already heavily leveraged balance sheet. Should oil prices fall further, or the CrownRock acquisition hit regulatory problems, OXY stock could get crushed. Year to date (YTD), OXY stock is down 3%. Over five years, the company’s share price is down 10%.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
