Media Stocks And The Damage Done

A powerful rally on Wall Street that included media and entertainment stocks — a rarity of late — fizzled by the end of trading Tuesday, a development that likely caught close to zero serious investors off guard given the volatility of stock-trading in recent weeks.

Some, in fact, predicted that a dead cat bounce was due, given that the same negative issues that sent stocks reeling Monday and last week are still dogging the markets, including evidence of slower growth in China and fear that interest rates in the U.S. and elsewhere must eventually rise.

The term "dead cat bounce" refers to a stock market rally in the midst of a market downturn — buyers scoop up what seem like bargains, then the buying dries up and the selling resumes. Monday’s big sell-off knocked the S&P 500 officially into “correction” territory, meaning the index is 10 percent off of recent highs, and Tuesday’s rally that turned negative just before the closing bell solidifies the thesis.

Jim Cramer, whose job is to recommend stocks on CNBC, appeared very cautious Monday night even when suggesting that Verizon Communications and Netflix might be worth purchasing, the former because of a 5 percent dividend yield and the latter because it is a growth stock with no exposure to China.

Prior to the recommendation, he warned: “I am not saying the market’s going higher, I am saying that we don’t know when it’s going to bottom.”


According to The Hollywood Reporter, since Aug. 4, no media-entertainment conglomerate has fallen harder than Viacom. Here’s the carnage since that day:

• Viacom: down 31 percent.
• 21st Century Fox: down 22 percent.
• Disney: down 21 percent.
• Time Warner: down 20 percent.
• CBS: down 18 percent.
• Comcast: down 14 percent.
• Sony: 13 percent.
• Even Netflix, which is supposed to be the prime beneficiary of the move by consumers to SVOD, is off since Aug. 4, to the tune of 16 percent.