September 17, 2019

Markets Tumble on Wal-Mart Earnings and Fed Uncertainty

Stocks on Wall Street fell the most since late June on Thursday in the wake of disappointing results from Wal-Mart and Cisco, and sturdy economic data that may set the stage for the Federal Reserve to scale back its stimulus soon.

In afternoon trading the Standard Poor’s 500-stock index was down 1.6 percent, the Dow Jones industrial average lost 1.4 percent and the Nasdaq composite fell 1.8 percent.

New claims for jobless benefits fell to near a six-year low last week, and consumer prices rose broadly in July, two reports that could draw the Fed closer to trimming its $85 billion monthly bond-buying program.

The Fed’s stimulus measures have kept interest rates low and buoyed equity markets this year, but on Thursday, United States Treasury yields hit two-year highs. Higher rates raise borrowing costs for consumers and companies and reduce the attractiveness of equities relative to higher-yielding bonds.

“The speed at which bond yields have increased has caught investors off-guard,” said Dan Greenhaus, chief global strategist at BTIG in New York.

Wal-Mart shares fell 2.3 percent after the discount retailer posted disappointing same-store sales and missed revenue estimates for a fifth consecutive quarter. The company also lowered its revenue and profit forecasts for the year.

“The Wal-Mart earnings report is as big a macro indicator as” gross domestic product data, said Nicholas Colas, chief market strategist at ConvergEx Group in New York.

It shows that consumer spending “isn’t that strong yet — inflation is rising, wages are not, unemployment is still pretty high and that’s not a recipe for a strong retail environment,” he said.

Trading volume was low, as it tends to be in August, and will likely remain lackluster as earnings season winds down.

The technology sector was the biggest laggard on the S. P. 500, weighed down heavily by Cisco Systems, which fell 6.9 percent as a slew of brokerages cut their price targets on the stock. The network equipment maker said recently it will cut 4,000 jobs, or 5 percent of its work force.

One of the few bright spots in retail earnings was Kohl’s, which reported a rise in quarterly same-store sales, sending its stock up 5 percent.

European markets closed lower, with the FTSE 100 index off 1.6 percent. Asian markets ended the trading day mixed, weakened by Mr. Bullard’s comments; Japan’s Nikkei was 1.3 percent higher, while China’s Shanghai composite lost 0.3 percent.

In commodity markets, supply worries linked to the growing violence in Egypt and the brighter global growth outlook pushed oil prices higher and kept copper near a nine-week high.

A state of emergency was declared by the Egyptian government on Wednesday after deadly clashes between riot police and supporters of ousted President Mohamed Morsi. Investors fear the political turmoil could choke off traffic in the Suez Canal or spill over into big oil-producing nations.

“Egypt may not be a major oil producer but the Suez Canal is an important gateway, not just for oil flows but also for commodities,” said Carl Larry, president of the consultancy Oil Outlook and Opinions, based in Houston. “If there is any disruption or if the violence results in the shutting down of the canal, the impact will be quite severe.”

Benchmark crude in New York rose 60 cents a barrel, to $107.45.

Gold was off 0.3 percent, at 1,330.10 an ounce.

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