Markets mixed in first half of the year
After strong gains last year during the first year of the Trump administration, the market value of Chattanooga’s publicly traded companies dropped by more than $8 billion in the first half of 2018.
Despite gains in the stock market Friday, most of the stock-traded companies headquartered in the Chattanooga area still lost value in the first six months of 2018, including major double-digit declines by the region’s biggest companies.
The overall stock market, as measured by the S&P 500, rose nearly 1.7 percent in the first half of the year to close Friday at 2,718.37, up 44.76 since the end of 2017.
The Dow Jones Industrials is the only major index still lower for the year, though only down 0.6 percent.
But most of Chattanooga’s stock-traded companies did not fare as well.
Mohawk Industries, the Calhoun, Ga.-based floorcovering company with the biggest market value among local companies, reversed an eight-year rise in its stock value this year, dropping by 22.3 percent and shedding nearly $4.6 billion of market value in the first half of 2018.
Unum Group, the Chattanooga-based insurance giant that is the region’s second most valuable company, shed nearly $4 billion of market value in the first half of this year after its shares fell by nearly a third.
Rising oil prices and Chinese competition have hurt the growth and margins for Mohawk Industries, although the company still reported a strong 11 percent gain in adjusted earnings in the first quarter of this year.
Unum shares, which dropped by 32.6 percent this year, plunged in May after the company said it was experiencing higherthan-expected claims in its long-term care business. The insurance giant still reported a 23 percent gain in per-share profits in the first quarter after reporting record profits in 2017. But the warning about long-term claims spooked some investors and caused a nearly 20 percent one-time drop in the company’s share price that Unum has yet to recover from.
An investor who purchased shares of Unum has sued the company, claiming Unum failed to disclose that the company was experiencing a higher claims incidence for its long-term care business. The Shareholders Foundation Inc., which specializes in filing class action suits for shareholders when share prices suddenly drop, claims Unum’s statements “related to the company’s long-term care reserves and capital management plans were materially false and/or misleading and/or lacked a reasonable basis.”
The biggest decline in market value among local companies was suffered this year by the Dixie Group, which lost more than 40 percent of its market value in the first six months of 2018 after reporting bigger losses in the first quarter compared with a year ago.
The biggest gainer this year in the Chattanooga area was Covenant Transport, the trucking giant that also led all local stocks in its 2017 gains on Wall Street. After Covenant shares jumped 49 percent last year, they were up nearly 10 percent more this year.
The first half of the year was full of surprises on Wall Street, which contributed to the market fluctuations.
Even experts and investors who expected more volatility after a historically calm 2017 were caught off guard by many of the developments inside and outside the markets this year, including the rapid gains stocks made in January, their abrupt descent into a “correction,” and the ongoing trade tensions that threatened to undo the benefits of the GOP tax overhaul and strong corporate profits.
Still, consumer-focused companies such as retailers had a strong start to the year and technology companies continued to rally, while high-dividend stocks, especially phone companies and household goods makers, lagged behind.
The Federal Reserve continued to push up short-term interest rates and the dollar rallied, contributing to a selloff in emerging markets. Long-term rates didn’t rise as much as shortterm rates, squeezing the amount of money banks could make from lending, and the financial sector posted a modest loss for the first half.
The Associated Press contributed to this report.