Stocks declined on Monday, with both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) indexes falling by more than 0.5%.
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Financial stocks were among the hardest hit, which helped Financial Select Sector SPDR ETF (NYSEMKT: XLF) fall nearly 1%. Meanwhile, gold-based exchange-traded funds including Direxion Daily Gold Miners Bull 3X ETF (NYSEMKT: NUGT) attracted heavy trading, but didn't move much, as the price of the precious metal held steady.
As for individual stocks, Fitbit (NYSE: FIT) and Tempur Sealy International (NYSE: TPX) both fell sharply after surprising investors with unwelcome news.
Fitbit's holiday slump
Fitbit shares plunged 17% after the fitness device specialist posted surprisingly weak results for the holiday shopping season. Revenue in the fourth quarter will be around $576 million, executives warned in preliminary results, which is far below the $737 million they had forecast in early November. That means sales will have grown 17% for the full year rather than the 25% jump that Fitbit was targeting.
The company blamed softer-than-expected demand for its fitness trackers, especially around the Black Friday shopping crunch, as it sold just 6.5 million devices compared to 8.2 million in the year-ago period. Its wider portfolio of products failed to spark significant consumer interest in the U.S. market and so the company had to resort to price cuts that sent profitability slumping.
Executives still believe the company has a good long-term outlook and that this disruption will be temporary. "We are confident this performance is not reflective of the value of our brand, market-leading platform, and company's long-term potential," CEO James Park said in a press release.
It's a large enough decline, though, that sales for the current fiscal year will be impacted. That convinced management to announce a range of cost-saving measures including layoffs. But Fitbit's bigger problem is that it has now endured two straight years of weakening device sales, which doesn't give investors much confidence that it can turn things around with its next batch of products.
Tempur Sealy loses a customer
Tempur Sealy shares collapsed 28% after the mattress giant announced that it is ending its relationship with its biggest, most profitable customer, Mattress Firm. Executives said that the client recently threatened to pull its business if Tempur Sealy didn't agree to more favorable supply terms. Ultimately, management declined to make what it described as "significant" economic concessions.
The company tried to put a positive spin on the contract dispute by arguing that Tempur Sealy will be better off in the long run. "This will enable us to immediately reorient our employees and resources to support retail partners that exhibit a long-term commitment to Tempur Sealy's brands," CEO Scott Thompson said in a press release.
Mattress Firm was responsible for just over 20% of sales in 2016 and a larger portion of profits, and so the impact to the business going forward will be significant. On the brighter side, the company announced a few preliminary details on the recently closed fourth quarter. Sales ticked up slightly and net income jumped to $63 million from a loss last year. That news alone might have been enough to send shares higher, but investors were more concerned with how the company could replace the sales it is foregoing with the end of its Mattress Firm partnership.
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