The major U.S. equity averages dropped on Wednesday following the announcement of the latest interest rate increase from the Federal Reserve. Worries that the Fed would push the economy into recession led to a 1.7% drop in the S&P 500.
Amid this decline, travel stocks were particularly hard hit. With investors concerned about demand in a shaky economic environment, American Airlines (AAL), United Airlines (UAL), Delta Air Lines (DAL), Carnival (CCL) and Royal Caribbean Cruises (RCL) all lost ground.
Sotera Health (SHC) was another standout decliner, adding to recent weakness as analysts responded to a recent legal setback. Meanwhile, selling pressure among Chinese EV stocks sent XPeng (XPEV) to a fresh 52-week low.
Looking to the upside, Apollo Medical Holdings (AMEH) and FREYR Battery (NYSE:FREY) both climbed on separate positive analyst comments.
Sector In Focus
As the Federal Reserve raised rates again and signaled that rate hikes would likely continue into 2023, fears about the global economy put pressure on travel stocks.
The slide included big-name airlines. American Airlines (AAL) dropped more than 5%, while United Airlines (UAL) and Delta Air Lines (DAL) each fell more than 4%.
Cruise operators were also among the notable losers. Carnival (CCL) posted a decline of nearly 7%. Royal Caribbean Cruises (RCL) was also weak, sliding by almost 6%.
A bullish analyst take encouraged buying in Apollo Medical Holdings (AMEH). Shares jumped almost 7% after William Blair initiated coverage on the healthcare management company with an Outperform rating.
AMEH finished Wednesday’s trading at $41.71, an advance of $2.57 on the day. The stock has seen significant volatility in 2022, falling from a level above $67 at the start of the year to a 52-week low of $29.52 reached in May.
Shares hit a 52-week high of $133.23 in November. Over the past 12 months, the stock has fallen nearly 54%.
Sotera Health (SHC) experienced a wave of selling after a legal setback prompted analyst skepticism about the firm’s near-term future. Shares dropped 11%.
Early this week, shares dropped after an Illinois jury found that the sterilization service provider’s Sterigenics unit was liable amid claims related to alleged carcinogenic emissions from one of its facilities. The company was ordered to pay $363M.
In response to the jury decision, JPMorgan downgraded its rating on SHC to Underweight from Overweight. “With 700+ individual lawsuits remaining, we see risk skewed to the downside relative to our coverage universe,” JPMorgan analysts, led by Casey Woodring, stated in a note.
SHC dropped 88 cents to reach $7.32. The slide added to a selloff that took place earlier this week as the jury award was first announced. The stock has now fallen 61% over the past month.
Notable New High
A positive analyst comment sent FREYR Battery (FREY) higher by 17%, with the stock reaching its highest level since coming public through a SPAC deal in mid-2021.
Morgan Stanley called the maker of rechargeable lithium-ion batteries for electric vehicles its top overall pick in the sector. In making the call, analyst Adam Jonas highlighted data points like binding offtake agreements and equipment orders.
FREY closed the session at $15.39, a rally of $2.25. During the day, shares reached an intraday 52-week high of $15.95. Overall, the stock has rallied off a 52-week low of $6.42 reached in late June.
Notable New Low
XPeng (XPEV) dropped to a new 52-week low, dragged down by a general retreat in China-based electric vehicle stocks. Shares of XPEV fell 12% on the day.
XPEV dropped $1.84 to end the session at $14.09. The stock also touched an intraday 52-week low of $13.92. The retreat extended a slide that has marked the past few months. Shares have fallen 60% since their closing price on June 24.
Wednesday’s decline took place in the context of a general sector retreat. Nio (NIO) fell about 10%, while Li Auto (LI) dropped 9%.
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