Benchmarks slumped yesterday after retail giant Wal-Mart
posted weaker than expected results. Investor sentiment was
dampened further after Cisco announced 4,000 employees would be
laid off. Additionally, the number of Americans applying for
unemployment benefits also decreased. This implies that the bond
purchase program might be ended next month. All the top ten
S&P 500 industry groups suffered losses. Consumer
discretionary stocks suffered the most, for the second
For a look at the issues currently facing the markets, make
sure to read today's
Ahead of Wall Street
The Dow Jones Industrial Average (DJI) lost 1.5% to close the
day at 15,112.19. The S&P 500 dropped 1.4% to finish
yesterday's trading session at 1,661.32. The tech-laden Nasdaq
Composite Index slipped 1.7% to end at 3,606.12. The fear-gauge
CBOE Volatility Index (VIX) increased 13.0% to settle at 14.73.
Consolidated volumes on the New York Stock Exchange, American
Stock Exchange and Nasdaq were roughly 6.4 billion shares,
marginally above 2013's average of 6.36 billion shares. Declining
stocks outnumbered the advancers. For the 81% that declined, only
Wal-Mart released results below than the Street's estimates.
Shares of Wal-Mart Stores, Inc. (NYSE:
) dropped 2.6% after its earnings came in at $1.24 per share,
compared to estimates of $1.25. Revenues of the company declined
to $116.2 million, compared to estimates $118.5 million.
Same-store sales declined 0.3% compared to analysts' estimates of
a gain of 1%. The company also said it was likely to face a
"challenging sales and operating environment" this year. Wal-Mart
also lowered its revenue guidance to between 2% and 3%, compared
to the earlier range of 5% to 6%. Profit guidance of the
company has also been lowered by 10 cents, to the range of $5.10
and $5.40 per share.
Another factor which spooked investors was the surprise
decision taken by Cisco Systems, Inc. (NASDAQ:
). Shares of the company declined 7.2% after the company
announced plans to lay off 4,000 employees, or nearly 5% of its
workforce. This decision was taken despite the fact that revenues
exceeded the Street's estimates.
A bunch of domestic reports were also released yesterday.
According to the U.S. Department of Labor, the number of
Americans applying for unemployed benefits dropped to 320,000
from last week's figure of 335,000. This was also below the
consensus estimate of 330,000. On a 4-week moving average basis,
initial claims data stood 332,000, down 4,000 from last week's
figure of 336,000. Every decrease in initial claims numbers
reaffirms the prospect of the Fed ending the $85 billion bond
purchase program soon.
According to data released by the Federal Reserve Board,
industrial production for the month of July remained flat,
compared to an increase of 0.2% in June. It was also below the
consensus estimate of 0.3%. Among its constituents,
manufacturing production slipped 0.1%. The output of mines
increased for the fourth month in a row, by 2.1% while production
of utilities dropped 2.1% for the straight fourth month.
Another report released by the U.S. Department of Labor showed
that the Consumer Price Index for All Urban Consumers (CPI-U)
increased 0.2% for July, in line with the consensus estimate. The
increase in the CPI-U is attributable to an increase in prices of
shelter, apparel, gasoline, and food. However, despite an
increase in gasoline prices, the energy index grew only 0.2%.
Apart from these items, price increases was also witnessed in
items like tobacco, medical care and new vehicles. However, the
indexes of airline fares, used cars and trucks slipped for the
month of July.
A series of consumer sentiment surveys for the month of August
were released yesterday. The Empire State Manufacturing Survey
released by the Federal Reserve Bank of New York indicates an
improvement in the general business conditions in New York. The
index came in at 8.2, marginally higher than the previous month,
but lower than the consensus estimate of 9.5. The new orders
index and the shipments index slipped to 0.3 and 1.5,
respectively. However, labor conditions improved to 20.5.
According to the Business Outlook survey released by the
Federal Reserve Bank of Philadelphia, manufacturing conditions
came in at 9.3, below than consensus estimate of 17.5. New orders
index increased for the third month in a row at 5.3 while
shipments index slipped into negative territory. The
employment index dropped to 3.5.
Consumer discretionary stocks were the biggest losers among
the top ten S&P 500 industry groups. The Consumer
Discretionary SPDR (XLY) dropped 1.8%. Stocks such as the Home
Depot, Inc. (NYSE:
), CBS Corporation (NYSE:
), Time Warner Inc (NYSE:
), Comcast Corporation (NASDAQ:
) and Time Warner Cable Inc (NYSE:
) dropped 3.0%, 2.0%, 1.8%, 2.0% and 2.3%, respectively.
CBS CORP (CBS): Free Stock Analysis Report
COMCAST CORP A (CMCSA): Free Stock Analysis
CISCO SYSTEMS (CSCO): Free Stock Analysis
HOME DEPOT (HD): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis
TIME WARNER INC (TWX): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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