Stocks fall on poor earnings from Macy's
| New York
The聽stock聽market fell on Wednesday as a poor earnings report from Macy's cast doubt on the outlook for consumer spending, a vital component of the U.S. economy.
Other department store聽stocks聽also fell after Macy's reported disappointing earnings for the second quarter and cut its forecast for the year.
The聽stock聽market's early summer rally has fizzled out after a strong July, and August is shaping up to be a lackluster month as many traders and investors take their summer breaks. The major indexes have drifted lower in the past week after climbing to all-time highs at the start of the month.
"I do feel we are going to have a slight negative bias (to聽stocks), at least until Labor Day," said Chris Bertelsen at Global Financial Private Capital. "We've had a pretty significant run in the market. People are taking some of the聽stocks聽that have had big runs, and are moving away from them."聽
Consumer discretionary聽stocks聽in the Standard & Poor's 500 index, which include clothing retailers and restaurant chains, have fallen in the past month, paring their gains for the year. Makers of consumer staples, which investors favored early in the year because of the steady earnings they offered, have also dropped in the last month.
The S&P index closed down 8.77 points, or 0.5 percent, to 1,685.39 The index has declined in six of the last eight trading days and is flat for the month. In July it jumped 5 percent.
The sell-off was broad. Technology was the only one of the 10 industry sectors that rose in the S&P 500.
The Dow Jones industrial average was down 113.35 points, or 0.7 percent, at 15,337.66, the biggest drop in six weeks. Twenty-two of the聽stocks聽in the 30-member index declined.
The Nasdaq composite fell 15.17 points, or 0.5 percent, to 3,669.27.
Macy's, which operates its namesake stores and Bloomingdales, dropped $2.17, or 4.5 percent, to $46.33 after its profit fell short of analysts' estimates. Macy's blamed shoppers' reluctance to spend for a slip in sales.
Nordstrom, a rival to Macy's, fell 64 cents, or 1.1 percent, to $59.54. The company reports its second-quarter earnings on Thursday. Sears fell 44 cents, or 1 percent, to $41.73.
There were some bright spots for investors.
Apple rose above $500 for the first time since January, climbing as high as $504 during the day, before closing up $8.93, or 1.8 percent, $498.50. The company's聽stock聽jumped 4.75 percent Tuesday after activist investor Carl Icahn said he thinks Apple should be doing more to revive its聽stock聽price. Icahn also said he had a large, but unspecified stake, in the company.
The聽stock聽market is adjusting to the prospect of higher interest rates as the Federal Reserve contemplates easing back on its stimulus. The central bank is buying $85 billion of bonds a month to keep long-term interest rates low and encourage borrowing and has said it may cut those purchases if it feels the economy is strong enough. Higher interest rates would increase borrowing costs throughout the economy.
In government bond trading Wednesday, the yield on the 10-year Treasury note slipped to 2.71 percent from 2.72 percent Tuesday.
The yield has risen sharply since May 3, when it hit its low for the year of 1.63 percent, as investors anticipate that the Fed will step back from its bond purchases.
Big dividend payers like utilities and phone companies have been slumping since May as Treasury yields have risen. The higher bond yields have diminished the appeal of rich-dividend聽stocks聽as a source of income.
Home builders have also been falling because government bond yields are used to set mortgage rates. If mortgage rates increase sharply, it could cool demand for homes and squelch a recovery in the housing market.
PulteGroup dropped for a seventh day out of the past eight, declining 26 cents, or 1.7 percent, to $15.11. Lennar dropped 50 cents, or 1.6 percent, to $31.66.
Investors may also be turning their attention to European聽stocks聽at the expense of U.S. markets.
Data showing that the economies of the countries that use the euro were out of recession gave a jolt to European聽stocks聽Wednesday. Eurostat, the European Union's statistics office, said the eurozone grew 0.3 percent in the April-to-June period, its first growth since late 2011.
"There are now clear signs that Europe is turning," said Jurrien Timmer, a portfolio manager at Fidelity Investments. The "U.S. could underperform Europe here, or may trade sideways while Europe advances."
While the S&P 500 has advanced 18.2 percent this year, Europe's biggeststock聽indexes have gained less. Germany's benchmark DAX index has climbed 11 percent, France's CAC-40 has gained 13 percent, and Italy's FTSE MIB has risen 7.3 percent.
In commodities trading, the price of oil edged up 2 cents to $106.85 a barrel. Gold rose $12.90, or 1 percent, to $1,333.40 an ounce.
The dollar rose a fraction against the euro and dropped against the Japanese yen.
After the close of trading, Cisco Systems reported quarterly earnings. The results just managed to beat Wall Street's expectations and the company's stock聽price was down $2.60, or 10 percent, to $23.78 an hour after the close. The company sells routers, switches, software and services to corporate customers and government agencies.
Among other聽stocks聽making big moves:
鈥� Steinway Musical Instruments jumped $3.02, or 7.9 percent, to $41.29 after agreeing to be purchased for $499 million by the investment firm Paulson & Co.
鈥� SeaWorld, which made its聽stock聽market debut in April, slumped $1.37, or 3.8 percent, to $34.94 after the company reported a loss for the second quarter as foul weather and higher ticket prices kept crowds away.
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AP Markets Writer Ken Sweet contributed to this story.
