Recession Warning Triggers Stock Selloff, Impacting SBGI

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The yield curve has inverted.


What does that mean? Wall Street has received an ominous omen courtesy of the bond market, which has — as Yahoo! Finance puts it — “flashed its brightest warning signal yet presaging a potential recession.”

The reaction was swift and painful, and several broadcast media companies were severely impacted by the news. Sinclair Broadcast Group was particularly dinged.

As of 11:34am Eastern, SBGI was trading at $42.67, down 10% from Tuesday’s close.

At the Closing Bell, Sinclair shares ended up down 8.6% to $43.40 on trading of 2.3 million shares; average trading for Sinclair is 1.32 million shares.

The nosedive puts Sinclair shares right back where they were on April 7, when investors expressed excitement that the acquisition of regional sports networks from FOX so The Walt Disney Co. could complete its merger with that company pushed SBGI past $61.

In fact, it was one month ago that SBGI was priced at $59.05.

It’s been downhill since for Sinclair, one year after its plans to merge with Tribune Media went up in flames.

The company poised to get the Tribune properties, Nexstar Media Group, is in its own funk on Wall Street. With an ugly impasse over retransmission consent preventing AT&T’s DirecTV, AT&T TV NOW and U-Verse from bringing Nexstar signals to customers, NXST on July 12 was $109.26 per share.

As the Closing Bell rang on Nasdaq, shares were knocked down to $92.08 —  a 7.2% decline from Tuesday’s close. This puts Nexstar stock back at pricing last seen in mid-February.

Other companies active in the media universe were also down sharply on Wednesday, including beleaguered audience measurement and consumer data firm ComScore. With shares at an all-time low amid a management crisis that began April 1, SCOR was off 7.3% to $1.79.

Also down: Cumulus Media, off 4.1% to $14.19; The E.W. Scripps Co., off 4.9% to $11.74; Entercom, down 5.5% to $3.44; and Salem Media Group, declining 3.1% to $1.85.

The culprit? The yield on the two-year U.S. Treasury note increased above that of the 10-year Treasury note just after 6am today (8/14).

This is the first inversion of this yield curve in a decade.

With the short-term yield rising above a long-term yield, the financial community sees this as a warning sign — one expressing less confidence in the short-term outlook.

A similar inversion took place in late 2005; a major recession officially transpired in December 2007.