Posted: May 20, 2014 1:29 PM
Updated: May 20, 2014 1:30 PM
U.S. stocks were heading lower Tuesday afternoon as disappointing earnings stoked investor concern about the retail sector and consumer spending. Staples, Dick's Sporting Goods and Urban Outfitters were among the biggest decliners.
KEEPING SCORE: The Standard & Poor's 500 index fell 14 points, or 0.8 percent, to 1,870 as of 3:25 p.m. Eastern Time. The Dow Jones industrial average shed 141 points, or 0.8 percent, to 16,375. The Nasdaq composite slid 31 points, or 0.8 percent, to 4,094. Small-company stocks fell more than the rest of the market as investors ditched higher-risk investments. The Russell 2000 index sank 17 points, or 1.5 percent, to 1,097, close to its lowest point in six months.
RETAIL SWOON: Staples' profit plunged 43 percent; Dick's Sporting Goods fell short and pared its outlook; Discount retailer TJX had weak sales and Urban Outfitters reported lower-than-expected earnings as sales at its namesake chain declined.
The dismal results may have some investors thinking that the weakness in the economy in the first three months of the year was due to more than harsh winter weather, Kate Warne, an investment strategist at Edward Jones.
"The fact that we're seeing such widespread weak growth among retailers means many are extrapolating that to the rest of the year," Warne said.
FIRE SALE: Staples plunged $1.70, or 12.6 percent, to $11.70. Dick's Sporting Goods fell $9.38, or 17.7 percent, to $43.77. Urban Outfitters slid $2.90, or 8 percent, to $33.26. TJX shed $4.08, or 7 percent, to $54.33.
HOUSING BET: Home Depot's adjusted earnings and revenue came in short of Wall Street's expectations. However a key sales metric improved, despite a slow start to the spring home-selling season caused by bad weather. The home improvement retailer also raised its full-year earnings forecast. Home Depot's stock rose $1.39, or 1.8 percent, to $77.88.
MORE RETAIL TURMOIL: Target fired the president of its troubled Canadian operations and replaced him with company insider Mark Schindele, who has been senior vice president of merchandising operations in the U.S. Target fell $1.60, or 2.8 percent, to $56.69.
HEFTY CHARGE: Medtronic agreed to pay more than $1 billion to settle long-standing patent litigation with fellow medical device maker Edwards Lifesciences over replacement heart valves. A one-time charge stemming from the settlement contributed to a 54 percent plunge in Medtronic's earnings in its fourth fiscal quarter. Medtronic's stock fell $1.08, or 1.8 percent, to $59.26.
SECTORS: Nine of the 10 sectors in the S&P 500 index fell, led by telecommunications stocks. The only one that rose was utilities. Investors tend to favor that sector when they want low-risk stocks that pay steady dividends.
TAKING 'EM BACK: General Motors is recalling 2.4 million vehicles in the U.S. as part of a broader effort to resolve outstanding safety issues more quickly. The latest action brings to 13.6 million the number of vehicles GM has recalled this year, a record for the automaker. Shares in GM lost $1.07, or 3.1 percent, to $33.18.
TENTATIVE MARKET: A week after the S&P touched an all-time high, the market has mostly alternated between small gains and losses. The three major indexes finished higher for the second trading day in a row Monday. A light schedule of economic reports for much of this week heading into Memorial Day weekend is likely to thin trading as the weekend nears.
"Light volume doesn't mean low volatility," noted Erik Davidson, deputy chief investment officer at Wells Fargo Private Bank. "Sometimes it means high volatility because it doesn't take much to move the market."
OTHER MARKETS: Bond prices rose. The yield on the 10-year Treasury note edged down to 2.51 percent from 2.54 percent late Monday. Gold rose 80 cents to $1,294.60 an ounce. Crude oil edged down 17 cents to $102.44 a barrel.