NEW YORK ( TheStreet) -- Dry-bulk stocks were under pressure Thursday as investors and traders, inspired by the broader market selloff, fled all sorts of risky plays -- for which shipping equities certainly qualify.
Mike Bellafiore, a trader and partner at SMB Capital, said "risk aversion" has suddenly become a factor again. Beaten-down shares of dry bulkers had staged a minor late-summer rally, especially
(DRYS - Get Report), the most widely traded among shipping issues, as investors sought to put money to work. But now, Bellafiore said in an email, market participants are "
From a fundamental perspective, investors may have been reacting, at last, to a precipitous drop in shipping rates that's been ongoing for about the last two weeks, posited Natasha Boyden, a research analyst with Cantor Fitzgerald.
According to the Baltic Exchange, the London-based shipping brokerage, rates for Capesize ships, the biggest dry-bulk haulers on earth, had fallen below the $23,000-a-day level, which is nearly break-even for ship owners.Even as those rates tumbled, equities in the sector had risen sharply. DryShips, for example, had gained 43% from the beginning of September until late last week, when the stock began to slide. Michael McDonough, RealMoney's resident shipping-sector observer, said in an email that many investors are equating economic recovery with a run-up in dry-bulk stocks. In normal times, McDonough says, this may be true. But with a well-documented slate of newly built vessels coming into service, a glut may well be developing, which would weigh on company profits as well as share prices.