This week’s stock market sell-off has further negatively impacted an already reeling gaming industry.
The Dow Jones Industrial Average lost 832 points in Wednesday trading, and another 546 points on Thursday. The nearly 1,400-point loss equates to a roughly six percent decline. The S&P 500, which MGM Resorts and Wynn Resorts are a part of, was also down six percent.
The Nasdaq has entered into correction territory after dropping more than 10 percent since August. The sell-off has been fueled by the FANG tech stocks, Facebook, Apple, Netflix, and Google, but the overall stock market plunge is impacting various industries including gaming.
MGM Resorts and Las Vegas Sands were both down about five percent during the two-day period, while Wynn Resorts dropped 2.3 percent. Caesars Entertainment, which isn’t invested in Macau and is more reliant on Las Vegas than the other three companies, dove 8.4 percent.
Gaming Industry Pullback
The gaming industry enjoyed a prosperous 2017 where casino stocks hit record highs. Less than 12 months later, most of those gains have been returned.
Blame it on last fall’s Strip shooting, ongoing trade war tensions between the US and China, or rising interest rates. Whatever the cause, the gaming industry has been one of the worst-performing sectors this year.
“We met with management teams from MGM, Caesars … and come away feeling reassured that recent weakness in the stocks is less a reflection of a change, weakening in underlying fundamentals, and more commonly attributed to technicals and interest rates,” JPMorgan analyst Joseph Greff said in a Tuesday note.
Investors have paid the price dearly in numerous casino stocks:
- MGM Resorts has gone from $37 in January to below $26, a 30 percent loss
- Las Vegas Sands has gone from $81 in June to $55, a 32 percent loss
- Wynn Resorts has gone from $200 in May to $116, a 42 percent loss
- Caesars Entertainment has gone from $14 in January to $9, a 35 percent loss
Correction or Chaos?
Stock market analysts are scurrying to determine whether the sell-off is simply a Wall Street correction, or an indicator that more trouble is ahead. The S&P 500 closed below its 200-day moving average on Thursday, which is a key indicator analysts use in evaluating the health of the market.
As I have said multiple times, I start to pay attention when the market cracks its 200-day moving average,” Commonwealth Financial Network Chief Investment Officer Brad McMillan wrote. “This break of a long-term trend line is definitely something worth noting. It doesn’t happen that often, and it can be a sign of more trouble ahead.”
Others say the sell-off is a short-term blip that could fuel another bull market.
Amanda Agati, co-chief investment strategist at PNC Financial Services, said, “I think earnings will be really strong and provide an underlying support for the market and be a positive catalyst. The current downdraft has a different feel than the sell-off in February.”