Moddy’s Corporation (MCO), Youku Tudou Inc (YOKU) and OCZ Technology Group Inc. (OCZ) Have Bigger Problems Than Europe’s Woes

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We’re only one month into the new year and already European financial woes are creeping back into the headlines, shaking European bourses and revealing the true fragile condition of the continent’s situation. It also took the wind out of the Dow Jones Industrial Average, which fell 130 points or almost 1% as the drama unfolded and indicated our own economy is standing on wobbly knees.

Adding to the distress, sequestration cuts are looming again. In true Washington fashion, the deal brokered to avoid the fiscal cliff last month didn’t resolve the problem, but merely punted it down the road for a time. March 1 is the new deadline for staving off across-the-board cuts and most observers doubt the politicians have the political will to do what’s right. February may indeed be the time to take some of the gains made over the past year and some stocks seem to have begun right out of the gate.

With three-quarters of all the stocks listed on New York Stock Exchange declining yesterday,  the three below were among the notable companies leading the way down.

Company Percentage Change
Moody’s Corporation (NYSE:MCO) (10.7%)
OCZ Technology Group Inc. (NASDAQ:OCZ) (7.7%)
Youku Tudou Inc (NYSE:YOKU) (7.2%)

Now don’t go running over the cliff like a lemming: it could just be a temporary situation. Let’s first see whether they had good reason to fall as panic-fueled routs can sometimes lead to excellent buying opportunities.

In the line of fire
News of the Justice Dept.’s decision to sue Standard & Poor’s for its role in the mortgage meltdown shook rival ratings house Moody’s as well. If they’re going after one agency, how long before they come after the others? S&P’s parent, The McGraw-Hill Companies, Inc. (NYSE:MHP) , tumbled almost 14% on the news.

S&P, Moody’s, and Fitch Ratings are the three of the biggest nationally recognized statistical rating organizations, a designation that gives them special roles in the financial markets. They were widely criticized in the aftermath of the financial crisis for having given high grades to what turned out to be virtually worthless junk.

Considering the many companies that arguably played a larger role in the financial crisis, it’s curious Justice is going after S&P. Investors undoubtedly feel that the ratings agency is only the first domino to fall, and that Moody’s and Fitch may be next in line. Until the dust settles though, Moody’s investors would wisely do well to remain on the sidelines

Dwindling chance of survival
Solid-state drive maker OCZ Technology confirmed the worst suspicions investors held about the state of its finances, predicting that revenue in both the second and third fiscal quarters will come in woefully short of expectations, somewhere between $65 million and $85 million.

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