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The Market Fell Hard Tuesday -- and These Stocks Took the Biggest Hit

Motley Fool - Tue Oct 3, 2023

Stock markets were once again sharply lower on Tuesday, moving into October on the same down note on which they finished September. Losses for the Nasdaq Composite (NASDAQINDEX: ^IXIC) came in at almost 2%, but even the broader S&P 500 (SNPINDEX: ^GSPC) and the Dow Jones Industrial Average (DJINDICES: ^DJI) were down significantly on the day.


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Data source: Yahoo! Finance.

Travel stocks have played a big role in sending the broader stock market higher in 2023. However, many stocks in the sector suffered sizable share price declines on Tuesday. Below, you'll learn more about some of the worst performers in the travel industry and what it could mean for Wall Street across the board.

Some big declines among favored stocks

The declines weren't limited to a small set of travel stocks. Online travel agencies felt the pain, with both Booking Holdings (NASDAQ: BKNG) and Expedia Group (NASDAQ: EXPE) losing about 3%. Hotel stocks suffered slightly smaller declines, but Marriott International (NASDAQ: MAR), Hilton Worldwide Holdings (NYSE: HLT), and Hyatt Hotels (NYSE: H) were all down about 2%.

Airlines suffered broad drops as well. American Airlines Group (NASDAQ: AAL) led the way with a 4% drop, but United Airlines (NASDAQ: UAL) and Delta Air Lines (NYSE: DAL) dropped about 3% each.

Alternative accommodations specialist Airbnb (NASDAQ: ABNB) was hit particularly hard. The company's stock dropped more than 6% as stock analysts at KeyBanc Capital Markets weighed in with negative views. KeyBanc downgraded Airbnb stock from overweight to sector weight. Analysts there admit that Airbnb has benefited greatly from the rebound in leisure travel that came about after pandemic-era restrictions on travel started to lift.

However, KeyBanc sees a limit to the upward momentum that rebound can generate, and analysts are concerned that growth in both volume of room-nights booked and the average daily rate for those accommodations could start to slow.

Cruisin' for a bruisin'

The other tough niche of the travel industry Tuesday was in cruise line stocks. Carnival (NYSE: CCL) led decliners there with a drop of 7%, but Royal Caribbean Cruises (NYSE: RCL) wasn't far behind, losing 5%. Norwegian Cruise Line Holdings (NYSE: NCLH) settled for a decline of almost 4%.

Cruise ship operators have benefited from the same tailwinds that Airbnb and other travel stocks have seen during the recovery from the pandemic. As restrictions on cruises lifted, travelers were quick to let loose their pent-up demand in booking trips.

However, investors appear to be cooling on cruise stocks. After reporting solid earnings results last week, Carnival's shares nevertheless dropped, as shareholders focused on various negatives. Carnival and other operators took on extensive levels of debt during the early parts of the pandemic in order to make it through closures. Now, rising interest rates are putting a lot of pressure on the companies to figure out ways to refinance debt as it comes due. Moreover, high oil prices could put an end to rebounding profits, at least in the short run.

On the whole, travel stocks have seen huge gains recently, so some level of pullback isn't surprising and was likely inevitable. What remains to be seen, though, is whether people actually stop spending on travel as quickly as they started once pandemic restrictions went away. If travelers start staying home, then this could be just the beginning of a broader decline for the industry.

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Dan Caplinger has positions in Booking Holdings. The Motley Fool has positions in and recommends Airbnb and Booking Holdings. The Motley Fool recommends Carnival Corp., Delta Air Lines, Hyatt Hotels, and Marriott International. The Motley Fool has a disclosure policy.

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