After Market: Earnings Fails Send Retail Stocks into a Tailspin

Investors are not buying what retailers are selling, in the stores or here on Wall Street, which was why retail stocks lead the broad market sharply lower on Tuesday. The Dow Jones industrial average (^DJI) tumbled 137 points, the Standard & Poor's 500 index (^GPSC) fell 12, and the Nasdaq composite (^IXIC) slid 29 points.

Home Depot (HD) bucked the downtrend, gaining 2 percent. Earnings topped expectations and more importantly, the company said sales this month have been "robust."

But the rest of the sector got hammered, especially apparel retailers, mainly due to disappointing earnings. Urban Outfitters (URBN) dropped 9 percent and TJX (TJX) fell 7½ percent; both fell short of expectations.

The sporting goods chain Dick's (DKS) tumbled 18 percent. It warned about future earnings, and -- this is interesting -- said the trends look negative for its golf and hunting departments.

Staples (SPLS) dropped 12½ percent as net fell sharply from a year ago and the company warned of heavy restructuring charges ahead. J.C. Penney (JCP) fell nearly 5 percent following a Wells Fargo (WFC) downgrade. Over the past year, the stock has lost half of its value.

Macy's (M), Target (TGT), Best Buy (BBY), Sears (SHLD) and PetSmart (PETM) all lost 2½ percent or more.

Elsewhere, General Motors (GM) lost 3½ percent after recalling another 2.6-million vehicles. It has now made 29 separate recalls this year, covering 13 million cars and trucks. It's doubling the charge it expects to take in the current quarter. GM shares are down about 13 percent over the past six months.

Intercept Pharmaceuticals (ICPT) fell 14 percent on a report of possible side effects tied to a key drug. The stock is well off its recent high, but it's still tripled in price this year.

But another biotech company, Ophthotech (OPHT), soared 24 percent. It agreed to sell the international marketing rights to an eye treatment to Novartis. It says the deal could be worth more than $1 billion over the life of the contract.

Finally, Chipotle Mexican Grill (CMG) lost more than 1 percent after getting dipping a toe in the gun control debate. The company has asked customers not to bring firearms into its restaurants.

What to Watch Wednesday:
  • The Mortgage Bankers Association releases its weekly index of mortgage applications.
  • The Federal Reserve releases minutes from its April interest-rate meeting at 2 p.m.
These major companies are scheduled to release quarterly financial statements:
  • American Eagle Outfitters (AEO)
  • Hormel Foods (HRL)
  • L Brands (LB)
  • Lowe's Cos. (LOW)
  • PetSmart (PETM)
  • Target (TGT)
  • Tiffany (TIF)
  • Williams-Sonoma (WSM)
-Produced by Drew Trachtenberg.

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