Benchmarks ended in the red on Friday following declines in retail and technology shares. Discouraging earnings results from departmental stores including Nordstrom and J.C. Penney adversely affected investor sentiment. Weaker-than-expected retail sales data also added to the dour mood. Meanwhile, Cisco's disappointing earnings and revenue forecast for the current quarter had a negative impact on technology shares. Benchmarks snapped a six-week winning streak to end the week in the red on Friday. The major indexes also posted their largest weekly losses since the week ended Aug 21.
For a look at the issues currently facing the markets, make sure to read today's Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) dropped 1.5%, or 254 points, to close at 17,065.00. The Standard & Poor's 500 (S&P 500) lost 1.4% to close at 2,011.25. The tech-laden Nasdaq Composite Index closed at 4,927.88, declining 1.5%. The fear-gauge CBOE Volatility Index (VIX) gained 9.3% to settle at 20.08. A total of around 4.2 billion shares were traded on Friday on NYSE. Decliners outpaced advancing stocks on the NYSE. For 60% stocks that declined, 37% advanced.
Friday's losses dragged the S&P 500 below its 200-day moving average as the index moved into the negative zone for the year. Additionally, the Nasdaq closed below its 50-day moving average. The index also ended below its key level of 5,000 for the first time since Oct 22.
Benchmarks fell sharply on Friday, weighed down by some weak retail earnings reports. Shares of Nordstrom Inc. ( JWN ) plunged almost 15% after the company reported third quarter earnings per share of 57 cents, way below the Zacks Consensus Estimate of 71 cents. Revenues of $3,328 million also missed the Zacks Consensus Estimate of $3,371 million.
J. C. Penney Company, Inc.'s ( JCP ) shares plummeted 15.4% after the company posted third quarter loss per share of 47 cents. However, its third quarter loss was narrower than the Zacks Consensus Estimate of a loss of 58 cents per share. Also, revenues of $2,897 million came in ahead of the Zacks Consensus Estimate of $2,864 million.
Including these results, 22 of the 43 retailers in the S&P 500 index have reported results. Total earnings for these companies are up 7.8% on 11.1% higher revenues. Of these companies, 59.1% beat EPS estimates and 45.5% came ahead of revenue estimates.
Weak retail sales data also dented investor sentiment. U.S retail sales barely increased in October, held down mostly by lower spending in auto dealers, gas stations and grocery stores. The U.S. Department of Commerce reported that retail sales gained 0.1% in October after remaining unchanged in September. However, the monthly gain missed the consensus estimate of 0.3% rise. Excluding auto, sales in October improved 0.2%.
The Consumer Discretionary Select Sector SPDR (XLY) declined 2.6%, the highest among the S&P 500 sectors. Amazon.com, Inc. ( AMZN ), The Walt Disney Company ( DIS ), The Home Depot, Inc. ( HD ), Comcast Corporation ( CMCSA ) and McDonald's Corp. ( MCD ) decreased 3.5%, 1.2%, 3.1%, 2.1% and 1.9%, respectively.
Coming to other economic reports, the U.S. Bureau of Labor Statistics reported that the U.S. Producer Price Index (PPI) for finished goods decreased 0.4% in October, in contrast to the consensus estimate of an increase by 0.2%. In September, prices for finished goods declined 0.5%.
Separately, the Thomson Reuters/University of Michigan's preliminary October consumer sentiment reading came in at 93.1. The preliminary reading was higher than the consensus estimate of 91.2.
Meanwhile, Cisco Systems, Inc.'s ( CSCO ) shares tanked 5.8% after its revenue and earnings guidance for the upcoming quarter fell short of analysts' expectations. For the second quarter of fiscal 2016, Cisco expects its revenues to grow at flat to 2% range on a year-over-year basis, while its earnings per share are pegged between 53 cents to 55 cents.
Cisco's forecast had a negative impact on technology shares. The Technology Select Sector SPDR ETF (XLK) dropped almost 2% and was the second biggest loser among the S&P 500 companies. Key stocks from the sector including Apple Inc. ( AAPL ), Microsoft Corporation ( MSFT ), Facebook, Inc. ( FB ), Alphabet Inc. ( GOOGL ) and AT&T, Inc. ( T ) decreased 2.9%, 0.9%, 3.8%, 2.2% and 1.2%, respectively. Overall, 11 out of 12 sectors of the S&P 500 ended in the red.
For the week, the S&P 500, the Dow and the Nasdaq declined 3.6%, 3.7% and 4.3%, respectively. Benchmarks ended in negative territory for the week following a sell-off in retail and energy shares. Declines in departmental stores including Macy's, Inc.'s ( M ) dampened investor sentiment. Energy shares were adversely affected due to decline in oil prices , which took a beating on oversupply concerns. Rate hike fears and global growth worries fueled by China's economic situation also weighed on investor sentiment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Latest Markets Videos
- Stimulus Update: MIllions Will Get a Stimulus Check in June. Are You One of Them?
- Social Security Checks Could Soar in 2023: Here's How Much Extra Seniors Might Receive
- Better Buy: Dogecoin vs. Terra Classic vs. Terra (LUNA)?
- Bitcoin Uses 50 Times Less Energy Than Traditional Banking, New Study Shows