Wall Street posts biggest drop since June on weak results

NEW YORK Thu Aug 15, 2013 4:36pm EDT

1 of 5. Traders work on the floor of the New York Stock Exchange August 13, 2013.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - U.S. stocks had the biggest one-day percentage drop since late June on Thursday in higher-than-average trading volume after poor results and outlooks from Dow components Wal-Mart and Cisco.

Consumer and technology stocks were among the biggest decliners after Wal-Mart Stores' (WMT.N) shares fell on a surprise decline in quarterly same-store sales and Cisco Systems (CSCO.O) shares dropped one day after the network equipment maker announced it was cutting 4,000 jobs.

"Yes, we are down significantly but this is not a panic sell-off considering how much we have rallied so far this year," said J.J. Kinahan, chief strategist at TD Ameritrade in Chicago. He added that although the CBOE Volatility Index .VIX, a gauge of investor anxiety, spiked for the day, the measure was still below 15.

Adding to the sell-off, data showed consumer prices rose broadly in July and new claims for jobless benefits last week fell near a six-year low, factors which could draw the Federal Reserve closer toward trimming its $85 billion monthly bond-buying program to stimulate economic growth.

The Dow Jones industrial average .DJI was down 225.47 points, or 1.47 percent, at 15,112.19. The Standard & Poor's 500 Index .SPX was down 24.07 points, or 1.43 percent, at 1,661.32. The Nasdaq Composite Index .IXIC was down 63.16 points, or 1.72 percent, at 3,606.12.

The CBOE Volatility index VIX .VIX rose nearly 12 percent to 14.55.

The S&P 500's 1.4 percent drop was the biggest since a 2.5 percent fall on June 20. So far this week, the index was down about 1.8 percent.

Wal-Mart (WMT.N) shares fell 2.6 percent to $74.41 after the world's largest retailer reported a surprise decline in 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."

The technology sector was the biggest laggard on the S&P 500, heavily weighed down by Cisco, which fell 7.1 percent to $24.51 as brokerages cut price targets on the stock.

Shares of smaller rivals Ciena Corp CIEN.O and F5 Networks (FFIV.O) were also down. Ciena fell 5.7 percent to $21.22 while F5 Network slipped 3.5 percent to $89.23.

One of the few bright spots in retail earnings was Kohl's (KSS.N), which reported a rise in quarterly same-store sales, sending its stock up 5.3 percent to $53.51.

Billionaire George Soros added another 2 million shares to his stake in struggling retailer J.C. Penney (JCP.N), regulatory filings showed. The retailer's stock was up 5.5 percent at $13.83.

Volume was roughly 6.4 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, above the average daily closing volume of about 6.3 billion this year.

On the NYSE, decliners beat advancers 2,611 to 452. On the Nasdaq, decliners beat advancers 2,068 to 478.

(Reporting by Angela Moon; Editing by Kenneth Barry)

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Comments (7)
arthurpkaske wrote:
I don’t think it dropped, I think it plunged.

Aug 15, 2013 1:29pm EDT  --  Report as abuse
moweddell wrote:
It is not a suprise! The overall economy in the past has been driven by consumers, small businesses, low unemployment, low prices, and considerable consumer confidence. The “current status’ of the economy has been protrayed by liberal media and even Obama government officials as recovering and doing fine, with all erroneously citing the “Stock Market” results as the only indicator, which of course is controlled and driven by the government itself with its $85 billion per month investments, etc… The large banks get almost zero cost of their frunds from the government and buy stock, driving up they value and selling for profits, while credit card and consumer loan costs are at shyrocket rates. Admit it, this is a govermnet driven and controlled economy, and sooner or later, like the old saying indicates: “the government is going to run out of other peoples money to spend”, and they will not get away for long continously printing new money to pay debts. The only solution to avoid collapse or even bankruptcy is reducing spending, perhaps even start a pay as you go government, like Texas, or an amendment requiring a balanced budget. This tax and spend madness must stop.

Aug 15, 2013 1:39pm EDT  --  Report as abuse
Rock-Roll wrote:
WalMart is a disgrace to the USA.
The Walton family is an embarrassment to other Americans.

I will not change my opinion of WalMart until
1. They stop falsely advertising that the products they sell are made in America. The majority are not.
2. They stop using child labor is 3rd and 4th world countries.
3. Pay all of the employees around the world a wage that allows to get off of government welfare programs, and public health care.

Then if you are still able to compete with other American based companies, I will change my opinion, and consider you an equal.

Aug 15, 2013 2:34pm EDT  --  Report as abuse
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