Wells Fargo Downgrades Casinos; Odds Getting More Uncertain

The odds got a little longer for casino stocks Monday after an analyst published a downgrade covering the full sector Monday, citing heightened uncertainty surrounding operations in Macau.

Discomfort with Macau performance has been growing since earlier this year on a slow-down in revenue growth laid to China's sluggish economy and a wide-ranging crackdown on corruption that has caused high rollers to lay low.

Wells Fargo's Cameron McKnight on Monday cut his rating on the entire sector to Market Weight, from Overweight, and took similar action on Wynn Resorts, Limited (NASDAQ: WYNN), Melco Crown Entertainment Ltd (NASDAQ: MPEL) and Las Vegas Sands Corp. (NYSE: LVS).

Cameron's caution isn't new. The analyst in a note last week warned that the Chinese economy and Macau "continue to remain soft."

An upcoming two-week Chinese Holiday in October, called Golden Week, is likely to prove disappointing, and a pending smoking ban inside Macau buildings "may create additional uncertainty," McKnight said.

Las Vegas Sands shares were off 3.5 percent Monday, while both Wynn and Melco was down nearly 3 percent.

Most other companies in the sector were down by a comparable amount.