Stocks slide on Wall Street; American Eagle drops
NEW YORK (AP) — Warnings of weaker profits helped pull the stock market down on Tuesday, despite some positive economic news.
The Standard & Poor’s 500 index had its biggest drop since June 24. The S&P lost 9.77 points, or 0.6 percent, to 1,697.37. All 10 sectors in the S&P 500 fell.
The Dow Jones industrial average fell 93.39 points, or 0.6 percent, to close at 15,518.74. The Nasdaq composite dropped 27.18 points, or 0.7 percent, to 3,665.77.
American Eagle plunged 12 percent after the retailer slashed its earnings forecast in half late Monday, blaming weak sales. The company said cutting prices on clothing to lure in shoppers was hitting its profit margins. American Eagle dropped $2.40 to $17.57.
Two of American Eagle’s rivals also slumped. Abercrombie & Fitch lost $2.09, or 4 percent, to $49.57. Urban Outfitters lost $1.20, or 3 percent, to $42.47.
Most companies have reported better results during the second-quarter earnings season, but sales have slowed. A growing number of companies, including eBay and Marriott, have told analysts to lower their expectations for the coming quarters. The overall picture has left investors with little reason to cheer.
“Earnings have been moving up, just not spectacularly,” said Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors. “We’d be much happier to see better revenue growth than what we’ve seen.”
Analysts expect companies in the Standard & Poor’s 500 index to post earnings growth of 4.4 percent in the second quarter. But revenue is on track to shrink 0.6 percent.
Major indexes headed lower from the opening bell Tuesday, bottomed out around 11 a.m. then slowly recovered some of their losses. The Dow was down as much as 138 points.
IBM fell the most in the Dow following reports that the company would require some workers to take time off this month as hardware sales slow. Credit Suisse also cut its rating on the company. IBM dropped $4.51, or 2 percent, to $190.99.
In economic news, the government reported record U.S. exports in June and new data was released showing that home prices are rising sharply.
The stock market remains near record highs. The S&P 500 index closed above 1,700 points for the first time last week and rose five of the past six weeks. The S&P, a benchmark for most stock mutual funds, is up 19 percent this year, ahead of its 13 percent gain in 2012.
Speculation that the Federal Reserve could start easing off its support for the economy helped knock commodity prices down Tuesday. Charles Evans, who votes on the Fed’s policy as president of the Federal Reserve Bank of Chicago, said the Fed could start scaling back its bond buying later this year.
Gold fell $19.90, or 2 percent, to $1,282.50 an ounce, while silver sank 19.7 cents, or 1 percent, to $19.523 an ounce.
Traders often buy gold in the belief that the Fed’s efforts would weaken the dollar and spur higher inflation, driving prices for gold and other precious metals higher. Hints from Fed officials that the bank may change course this year have battered commodity prices.
The yield on the 10-year Treasury note was unchanged from late Monday at 2.64 percent.
Among other companies in the news:
— The Washington Post Co. rose $24.30, or 4 percent, to an even $593 after the company announced late Monday that it would sell its namesake newspaper to Amazon founder Jeff Bezos.
— CVS Caremark sank $1.73, or 3 percent, to $59.89 after the drugstore operator lowered its earnings target for the year.
— Molson Coors Brewing gained $3.18, or 6 percent, to $53.26. The company reported better earnings and revenue than analysts had expected, helped by sales in central Europe. Molson bought the Czech Republic-based brewer StarBev last year.