Investors are running out of superlatives to describe how ugly this year’s S&P 500 crash is. But here’s a fact that brings it home: 11 big stocks are now trading for less than $4 a share.
Nearly a dozen stocks in the S&P 1500, including healthcare stocks Endo (ENDP) and Diversified healthcare trust (DHC) and technology companies Diebold Nixdorf (DBD), plunged south of $4 per share just this year. This is one of the latest signs of carnage, as the S&P 500 itself has fallen more than 21% this year, landing in a bear market.
Stocks in the S&P 1500, which includes both small-caps and giants in the S&P 500, are now trading at a median price of 51.65, down almost 20% from the start of the year.
Investors are aggressively selling stocks amid a toxic cocktail of events. On the one hand, inflation is at a decade high. At the same time, the Federal Reserve is raising short-term interest rates. The result? Investors fear the start of the dreaded stagflation – or periods of rising prices and slowing growth.
“The risk of stagflation is real and we could already be there. Inflation is running hot and the last GDP print was negative. For some, our economy may feel very much like stagflation, with higher prices and flagging consumer confidence,” said Nancy Davis , founder of Quadratic Capital Management.
How ugly this S&P 500 really is
The slump in share prices per share is just the latest sign of the market’s pain. The list of trouble spots is getting longer and longer.
At Monday’s S&P 500 close of 3,837.24, that’s down 20% from the previous high of Jan. 3. This date now marks the end of the bull market and the beginning of the current bear market. “Buyers are sidelined. Hopefully they didn’t leave the building,” said S&P Dow Jones Indices’ Howard Silverblatt.
And it’s not just the S&P 500 in a bear market. The Nasdaq is down more than 30% so far this year. It’s the worst start to the year for markets since 1962, says Empire Financial’s Whitney Tilson.
Meanwhile, large- and mid-cap stocks “are now trading at their lowest (valuation) levels since Covid,” Bank of America said. However, small caps are suffering even more and valuations are falling to financial crisis levels. “Small caps… 21% below average and trading at levels last seen in February 2009,” BofA said.
Ironically, during the Covid crash, oil and energy stocks are the ones that plummeted to pennies a share.
Looking at the Wreck of a Stock Under $4: Penny Stocks?
Generic drug seller Endo is the most dramatic example of a stock decline yet. It’s literally a penny stock now.
The company, which sells Xiaflex to treat Dupuytren’s contracture and Nascobal to boost B12 deficiency, has seen its shares plummet more than 92% this year. That means the stock, which traded for 3.76 a share through 2022, is now worth just 30 cents a share.
Not far behind is Diversity Health Care Trust. The company, which leases space for medical facilities like nursing homes, isn’t far from penny stock territory either. Shares are down more than 35% this year, dragging them down to 1.95 a share.
Expansion to other sectors
As the market continues to fall, stocks from other sectors are also being dragged down. Even technology.
Investors have cashed out their stakes in ATM maker Diebold Nixdorf. The company’s shares are now down more than 70% this year. That means this stock, which started the year at $9.05 per share, now costs just $2.48 per share.
But the question now is: Will there be more pain? Will more stocks join Endo in penny stock territory before this crash is over?
“No two bear markets are exactly alike,” said Bespoke Investment Group. This bear was faster to come. Will it also go faster?
What’s next for the S&P 500 bear?
Typically, the “S&P 500 takes 244 days to reach the 20% bear market threshold, so the S&P 500 actually entered bear market territory faster than average at 161 days for the current period,” Bespoke noted. “Of the 14 previous bear markets, only four entered 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.”
However, market observers are also hoping for a rapid upswing. “Once the S&P 500 hits the 20% threshold, expected returns tend to be better than average, especially in the following year,” Bespoke said. More than half of the 14 bear markets (8) bottomed out within two months of hitting the 20% level.
But here’s the worrying part. If this unusual rally doesn’t come soon, more pain could follow. “Of the six bear markets that failed to bottom within two months, three (1946, 1973, and 2000) lasted more than six months before the next rally of 20% (or more) began,” noted Bespoke.
We’ll see if these stocks can find support at $4 or if they need to fall further first. And that could be awfully uncomfortable.
S&P 1500 stocks plummet below $4 a share
|company||symbol||Price/share at the beginning of the year||price now||Share YTD % ch.||sector|
|Endo International||(ENDP)||3.76||0.30||-91.9%||health care|
|Diversified health care||(DHC)||3.09||1.96||-36.2%||property|
|Diebold Nixdorf||(DBD)||9.05||2.47||-72.9%||information technology|
|New York Mortgage Trust||(NYMT)||3.72||2.59||-27.7%||finance|
|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 Real Estate||(FSP)||5.95||3.92||-33.2%||property|
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @dull wreath
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