Investors are running out of superlatives to describe just how ugly the S&P 500 crash this year is. But here’s a fact that drives it home: 11 major stocks are now trading for less than $ 4 a share.
Nearly a dozen stocks in the S&P 1500, including health care plays Endo (ENDP) and Diversified health care Trust (DHC), and technology company Diebold Nixdorf (DBD), crashed to south of $ 4 a share just this year. It’s one of the latest signs of carnage as the S&P 500 itself dropped more than 21% this year, landing it in a bear market.
Stocks in the S&P 1500, which include both small caps and giants in the S&P 500, are now trading for a median price of 51.65, down nearly 20% from just the start of the year.
Investors are aggressively selling stocks amid a toxic cocktail of events. On one hand, inflation is hitting multi-decade highs. And at the same time, the Federal Reserve is jacking up short-term interest rates. The result? Investors fear the onset of dreaded stagflation – or period of rising prices and slowing growth.
“Stagflation risk is real and we may already be there. Inflation is running hot and the last GDP print was negative. To some, our economy may feel very much like we have stagflation, with higher prices and slowing consumer confidence,” said Nancy Davis , founder of Quadratic Capital Management.
Just How Ugly This S&P 500 Really Is
Plummeting per-share prices of stocks is just the latest sign of the market’s pain. The list of trouble spots just keeps getting longer.
At Monday’s S&P 500 close of 3,837.24, that’s 20% below the previous high set on Jan. 3. That date now marks the end of the bull market and the start of the current bear. “Buyers are sidelined. Hopefully they have not left the building,” said Howard Silverblatt of the S&P Dow Jones Indices.
And it’s not just the S&P 500 in a bear market. The Nasdaq is down more than 30% this year so far. It’s the worst start to a year for markets since 1962, says Whitney Tilson of Empire Financial.
Meanwhile, large and midcap stocks are “now trading at the lowest (valuation) levels since Covid,” hit, said Bank of America. Small-caps, though, are suffering even more and valuations are falling to Financial Crisis levels. “Small caps … trade 21% below average and at levels last seen in February 2009, “BofA said.
Ironically, during the Covid crash, oil and energy stocks are the ones that crashed to pennies a share.
Looking At Sub- $ 4 A Share Wreckage: Penny Stocks?
Generic drug seller Endo is the most dramatic example yet of a fallen stock. It’s now literally a penny stock.
The company, which sells Xiaflex to treat Dupuytren’s contracture and Nascobal to boost B12 deficiency, has seen its shares collapse more than 92% this year. That means the stock, trading for 3.76 apiece coming into 2022, is now worth just 30 cents a share.
Not too far behind is Diversity health care Trust. The company that leases space needed for medical facilities like nursing homes isn’t far from penny-stock territory, either. Shares are down more than 35% this year, knocking them down to 1.95 apiece.
Spreading Out To Other Sectors
As the market continues to plunge, stocks from other sectors are getting dragged down, too. Even technology.
Investors have cashed out their shares of ATM maker Diebold Nixdorf. Shares of the company are now down more than 70% this year. That means this stock, that entered the year worth 9.05 a share is now just 2.48 a share.
The question now, though: Is more pain to come? Will more stocks join Endo in the penny stock territory before this crash is done?
“No two bear markets are exactly alike,” said Bespoke Investment Group. This bear has been faster to come. Will it depart faster, too?
What’s Next For The S&P 500 Bear?
It typically takes the “S&P 500 244 days to reach the 20% threshold for a bear market, so at 161 days for the current period, the S&P 500 actually got to bear market territory quicker than average,” Bespoke found. “Of the 14 prior bear markets, only four reached bear market territory faster than the current period (1946, 1987, 2009, and 2020), and of those, only two (1987 and 2020) were bear markets that started from all-time highs. “
Market watchers hope, though, is for a fast bounce, too. “Once the S&P 500 reaches the 20% threshold, forward returns tend to be better than average, especially over the following year,” Bespoke said. In more than half the 14 bear markets (8), the low was within two months of the 20% threshold being reached.
But here’s the troubling part. If that off-the-low rally does not come soon, more pain might be coming. “Of the six bear markets that did not reach the low within two months, three (1946, 1973, and 2000) dragged on for more than six months before the next rally of 20% (or more) commenced,” Bespoke found.
We’ll see if these stocks can find support at $ 4, or if they must fall more first. And that might be awfully uncomfortable.
S&P 1500 Stocks Crash Below 4 Bucks A Share
|Company||Symbol||Price / share at this year’s start||Price now||Stock YTD% ch.||Sector|
|Endo International||(ENDP)||3.76||0.30||-91.9%||Health Care|
|Diversified health care||(DHC)||3.09||1.96||-36.2%||Real Estate|
|Diebold Nixdorf||(DBD)||9.05||2.47||-72.9%||Information Technology|
|New York Mortgage Trust||(NEW)||3.72||2.59||-27.7%||Financials|
|OraSure Technologies||(OSUR)||8.69||2.72||-68.6%||Health Care|
|Nectar Therapeutics||(NKTR)||13.51||3.17||-76.8%||Health Care|
|Rayonier Advanced Materials||(RYAM)||5.71||3.38||-41.3%||Materials|
|Franklin Street Properties||(FSP)||5.95||3.92||-33.2%||Real Estate|
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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