MARKET SNAPSHOT: U.S. Stocks Sell Off, Erase Tuesday's Rally
May 11 2016 - 4:53PM
Dow Jones News
By Anora Mahmudova and Victor Reklaitis, MarketWatch
The SPDR S&P Retail ETF has its worst drop in nearly 5
years
A steady selloff on Wall Street that accelerated at the close
Wednesday erased nearly all of the sizable gains from the previous
day's session, as disappointing earnings from Disney and a slump
among retailers led to disquiet among investors.
A slide in consumer-discretionary stocks, which include retail
shares such as Macy's and Nike, weighed on the Dow and S&P 500,
offsetting a 4% jump in oil prices.
The Dow sank 217.23 points, or 1.2%, to 17,711.12, led by Walt
Disney Co.'s 4% selloff and a 3.7% drop in Nike Inc. (NKE). Of the
30 blue-chip stocks, all but one ended in negative territory. Only
Microsoft Corp.(MSFT) closed marginally higher.
The S&P 500 dropped 19.93 points, or 1%, to 2,064.46, with
nine of its 10 main sectors trading lower. Retailers such as
Staples Inc.(SPLS), Macy's Inc.(M), and Michael Kors Holdings Ltd.
(KORS) declined by double digits.
The SPDR S&P Retail ETF (XRT) was down 4.4%, representing
its worst decline since August 2011.
Meanwhile, the Nasdaq Composite declined 49.19 points, or 1%, to
4,760.69.
"It's clear that sentiment was dented by disappointing earnings
today, especially by Disney," said Karyn Cavanaugh, market
strategist at Voya Investment Management.
Cavanaugh sounded optimistic in her outlook for the rest of the
year, however, despite the 7.5% decline in first-quarter profit
growth.
"Earnings in the second quarter will also be negative, but not
as bad as in the first quarter, and will improve in the second half
of the year," she said. Cavanaugh said she expects the Federal
Reserve, which has maintained an ultraloose monetary policy despite
raising rates in December, to keep benchmark interest rates
low.
Tuesday's rally for stock markets surprised some investors who
still harbor concerns about corporate growth and economic
sluggishness overseas.
"Yesterday's global equity journey was strangely optimistic when
much of the economic data has been a little light in recent times,"
said David Buik, market commentator at Panmure Gordon & Co., in
a note Wednesday. "As the threat of an increase in the Fed rate
dissipates, investors girded up their loins, buoyed by higher oil,
better quality earnings and a feeling that perhaps markets had been
oversold."
"It wasn't so much a euphoric session; it was just a question of
sentiment improving," Buik added.
Other markets: On Wednesday, West Texas intermediate crude
(http://www.marketwatch.com/story/crude-prices-fall-on-sticky-worries-about-oversupply-issues-2016-05-11)
settled up 3.5%, at $46.23 a barrel after a drop in U.S. crude
inventories and declines in domestic production. European stocks
(http://www.marketwatch.com/story/european-shares-under-pressure-as-jcdecaux-oil-prices-pull-back-2016-05-11)
ended mostly lower, while Asian markets
(http://www.marketwatch.com/story/aussie-stocks-jump-as-oil-gains-but-other-asian-markets-mixed-2016-05-11)
closed mixed. Gold futures gained, as the ICE U.S. Dollar Index
pulled back.
Individual movers: Disney (DIS) was the biggest decliner within
the Dow, after the entertainment giant late Tuesday posted
weaker-than-expected quarterly results
(http://www.marketwatch.com/story/disney-results-boosted-by-star-wars-zootopia-2016-05-10-164853110).
"Despite two blockbuster movies in 'Star Wars' and 'Zootopia,'
Walt Disney failed to meet analysts' expectations," Buik said.
Read: Reactions to Disney's big miss -- still "significant
value" in movies
(http://www.marketwatch.com/story/reactions-to-disneys-miss-investors-have-been-spoiled-still-significant-value-in-films-2016-05-11)
Staples Inc.(SPLS) was the biggest loser within the S&P 500,
diving 18% following news that its planned buyout of rival Office
Depot Inc.(ODP) ended unsuccessfully
(http://www.marketwatch.com/story/staples-office-depot-merger-killed-by-antitrust-claims-again-2016-05-10).
Macy's Inc.(M) shares sank 15% after the retailer reported
first-quarter sales that missed expectations
(http://www.marketwatch.com/story/macys-shares-fall-in-premarket-after-sales-miss-expectations-outlook-lowered-2016-05-11)
and issued a profit warning.
Michael Kors Holdings Ltd. (KORS) fell 12% in the wake of
disappointing results from competitor Fossil.
On the upside, Electronic Arts Inc.(EA) rose 14%, making it the
best-performing stock in the S&P 500. The maker of video games
late Tuesday reported better-than-expected quarterly results
(http://www.marketwatch.com/story/ea-leans-on-star-wars-to-beat-consensus-2016-05-10).
(END) Dow Jones Newswires
May 11, 2016 16:38 ET (20:38 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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