- POSTED: 16 May 2014 05:12
- UPDATED: 16 May 2014 05:16
US stocks on Thursday tumbled after weak earnings from Wal-Mart hit retail equities amid concerns that investors are shifting from stocks to bonds.
NEW YORK: US stocks on Thursday tumbled after weak earnings from Wal-Mart hit retail equities amid concerns that investors are shifting from stocks to bonds.
The Dow Jones Industrial Average sank 167.16 points (1.01 per cent) to 16,446.81 after earlier slipping below 16,400.
The broad-based S&P 500 plummeted 17.68 points (0.94 per cent) to 1,870.85 while the tech-rich Nasdaq Composite Index shed 31.33 points (0.76 per cent) to 4,069.29.
Analysts said disappointing earnings from Wal-Mart Stores weighed on the broader market.
The retail giant reported earnings of US$1.10 per share, five cents below expectations. Shares of the Dow component fell 2.4 per cent. Other retailers also fell, including Macy's (-1.3 per cent) and Target (-1.8 per cent).
Michael James, managing director of equity trading at Wedbush Securities, said investors are also "nervous" at the drop in treasury bond yields as demand for fixed-income investments picks up.
"When you continue to see the bond market telling you an economic slowdown is coming, it's not very inspiring," James said.
"If the economy is not growing, you are going to be exiting equity exposure and increasing fixed-income exposure."
Large banks had a bad day, including Bank of America (-2.0 per cent), Citigroup (-1.3 per cent) and Dow component JPMorgan Chase (-1.6 per cent).
Prominent growth stocks also did badly, including Facebook and Netflix, both losing 2.2 per cent.
General Motors fell 1.7 per cent after it recalled nearly three million more vehicles. The biggest recall involves several car models that could suffer from a brake-lamp problem linked to 13 crashes.
Retailer Kohl's reported a 15 per cent dip in earnings on falling sales. That translated into 60 cents per share, two cents shy of expectations. Shares fell 3.4 per cent.
Cisco Systems meanwhile gained 6.0 per cent as it gave an encouraging outlook on business conditions in the US and Europe. The information technology giant also bested expectations for earnings and revenues.
Cable and Internet service suppliers Comcast (+1.0 per cent) and AT&T (+0.4 per cent) gained after the Federal Communications Commission voted for a controversial proposal that would allow them to charge certain customers extra to use Internet "fast lanes."
Bond prices rose. The yield on the 10-year US Treasury fell to 2.50 per cent from 2.54 per cent on Wednesday, while the 30-year declined to 3.34 per cent from 3.38 per cent. Bond prices and yields move inversely.