Dow Contracts on Poor Growth Outlook


The broad markets are trending down as slowing growth is starting to nibble at corporate top and bottom lines. Retail sales for June are the newest example of the negative effects caused by the outsized debt levels in Europe and slowing GDP growth in China. For the third straight month, retail sales in the United States declined as consumers are holding off discretionary spending until the labor market starts to pick up.

The negative growth figures that have been piling up this past quarter will not be corrected anytime soon, as the International Monetary Fund cut its global growth forecasts for 2013. The IMF stated Europe's debt crisis is causing headwinds for emerging markets and it expects global growth to shrink to 3.9% from its original 4.1% figure.

How are the markets holding up?



Gain/Loss %

Dow Jones Industrial Average (INDEX: ^DJI)



S&P 500 (INDEX: ^GSPC)






WTI Oil Futures



Source: Yahoo! Finance.

The last time retail sales dropped for three consecutive months was during the housing market collapse in 2008. Today's retail report is punishing Home Depot, down 1.17%, as building materials slipped 1.6% from in June. Staying in the Dow, Caterpillar (NYS: CAT) lost 1.01% today as the company is also feeling squeezed by slowing growth as it disturbs both its construction and resource industries sales.

Citigroup (NYS: C) is trading higher today after reporting EPS of $0.95, beating analyst estimates. Second-quarter earnings results were down 12% year over year, as the bank is still realizing losses from the financial collapse.

J.B. Hunt will announce its second-quarter results after the markets close today, with an expected EPS of $0.67 on revenue of $1.31 billion. If J.B. Hunt hits its estimates, the company will grow its earnings by 26% year over year.

Alpha Natural Resources (NYS: ANR) declined mightily today, down 10%, after BMO Capital downgraded the coal company. This move comes one week after Patriot Coal filed for Chapter 11 bankruptcy protection. Appalachian coal demand continues to fall, as more power is generated by natural gas and cheaper coal out West affect the East coast thermal coal companies.

Long-term thinking
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Joel South owns shares of no company listed above. The Motley Fool owns shares of Citigroup. Motley Fool newsletter services have recommended buying shares of Home Depot. The Motley Fool has a disclosure policy.
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