BOSTON (TheStreet) -- Investor confidence in the equities market was eroded in the second quarter as Americans shifted out of stocks and in to the relative safety of fixed-income investments.
That resulted in a 5.5% tumble for the
in the period, on the heels of a 12% first-quarter gain.
It's not just the conundrum that is the European sovereign debt crisis that worries investors, it's also the struggling domestic economy, the outcome of health-care reform and the nation's ultimate direction, given that it's a presidential election year.
And the outlook for stock investors isn't likely to be clarified any time soon. "Investors continue to confront the paradox of a three-year-old subpar U.S. economic recovery that is generating record levels of quarterly corporate earnings, but is producing extremely low levels of investor confidence," say S&P Capital IQ analysts. "As a result of the low growth, the U.S. economy is more vulnerable than normal to external negative influences."
The energy sector is the biggest loser in the second quarter, down almost 12%. Financials are down about 8%, with the industrials, materials and information technology industries not far behind, all with declines of just over 7% in the period.
Two energy industry companies turned in some of the worst performances in the second quarter, although they're at different ends of the spectrum when it comes to power generation.
The biggest loser in the S&P 500 in the quarter is coal miner
Alpha Natural Resources
, down 46%. Investors bailed out of its shares, knowing that there is a huge supply of coal on hand at utility power stations after a mild winter. Longer term, it is clear that natural gas, which is at record low prices now, is increasingly going to be replacing coal as an energy source for utilities.
Shares of solar power module maker
declined 37%, as concerns rose over its viability and the profitability of its business line due to increased competition from China and decreasing government subsidies for solar energy products.
High-end retailers have also been hurt by Europe's economic weakness as they've seen a decline in demand due in part to high unemployment and the slipping value of the euro.
Losers include quirky fashion accessories seller
, down 41%, the second-worst performance in the S&P 500 in the quarter, and upscale clothier and retailer
Abercrombie & Fitch
, down 38%.
Here are the 10 worst-performing stocks in the S&P 500 in the second quarter, ranked from least to worst share-price decline:
Ryder, with a market value of $1.8 billion, provides rental services for commercial trucks as well as logistics services.
Its shares fell 33% in the second quarter and 32% this year. The business is highly sensitive to economic activity, so the sluggish outlook hurts revenue and earnings projections and, hence, valuations. Nevertheless, no analyst gives the shares a "sell" rating.
MetroPCS, with a market value of $2 billion, is a provider of wireless voice and data services on an unlimited fixed-price basis, with no contract required. It currently serves about 10 million customers.
Its shares dropped 35% in the second quarter and 32% this year. S&P has the stock rated "hold," mainly due to an outlook for a 19% decline in operating earnings in 2012 because of higher subsidies and system upgrades costs.
United States Steel
U.S. Steel, with a market value of $2.7 billion, is the second-largest steel company in the U.S. and among the top 20 globally.
Its shares declined 35% in the second quarter and 27% this year. Morningstar analysts say "steel stocks have been whipsawed by economic conditions in Europe and China, and we don't believe strategic initiatives or domestic market conditions will move the needle until more clarity develops around global economic stability and growth."
J.C. Penney, with a market value of $4.7 billion, is a national department store chain with more than 1,100 stores nationally.
Its shares tumbled 36% in the second quarter and 37% this year. The company announced both a new pricing strategy in which it slashed prices by as much as 40% as well as a corporate restructuring in February but faces economic headwinds. S&P says that "given a tepid economic recovery, a cautious moderate-income consumer and intense competition, we do not see business materially improving until fiscal 2014 at the earliest."
First Solar, with a market value of $1.3 billion, makes solar modules and constructs turnkey solar systems.
Its shares plummeted 37% in the second quarter and 55% this year. S&P says there is "deteriorating fundamentals, potential downside to consensus estimates, and management turnover," as well as government incentive reductions and more challenging financing conditions impacting demand internationally.
Genworth, with a market value of $2.4 billion, sells mortgage, long-term care, life and annuities.
Its shares declined 38% in the second quarter and 25% this year. The company lost big on its mortgage insurance business in the financial collapse of 2008 and has slowly recovered from a near-bankruptcy. Its flagship product now is long-term care insurance, but it too faces uncertainties and challenges as health-care costs rise and the government tinkers with programs, which will push up the price of that type of insurance and thereby decrease the number of people who can afford it.
Abercrombie & Fitch
Abercrombie & Fitch, with a market value of $2.5 billion, sells upscale clothing brands that appeal to status-conscious young people. It operates over 1,000 retail stores across four brands.
Its shares nosedived 38% in the second quarter and 38% this year. But analysts are relatively upbeat, mostly on the basis of its relatively low valuation. Its international operations have been the biggest growth segment in recent years, but the economic uncertainty in Europe casts a pall on the outlook for now.
Netflix, with a market value of $3.7 billion, rents DVDs and provides a video-streaming service delivering digital content to PCs, Internet-connected TVs, and consumer electronic devices throughout North America, parts of Europe and South America.
Its shares tumbled 41% in the second quarter and 3.3% this year. "The transition from DVDs to digital delivery levels the playing field for Netflix's competitors," says Morningstar analysts, while content providers that Netflix relies on for product may decide to keep tighter control on them or distribute through their own channels. But the "recent selloff appears somewhat overdone to us," S&P says, based on the view that it is "well-positioned to benefit from an exponential global growth of streaming video consumption."
Fossil, with a market value of $4.6 billion, designs and sells fashion watches and other accessories for distribution in department stores in over 100 countries.
Its shares dropped 41% in the second quarter and 6.8% this year. Its recent share-price performance has been hurt by concerns over Europe, where same-store sales fell 5% in the first quarter."
Alpha Natural Resources
Alpha Natural, with a market value of $1.7 billion, is the nation's third-largest coal producer. It is noted for its high-quality coal and relatively high operating margins.
Its shares tanked 46% in the second quarter and 61% this year. No analyst gives the stock a "sell" rating. S&P analysts say: "Current coal fundamentals are poor, reflecting high stockpiles at U.S. power producers after a mild winter and switching by utilities to natural gas due to near record low natural gas prices. Given the increased production of natural gas in the U.S., we expect switching and depressed pricing to continue."
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