Closing Bell: Stocks Tumble Again on Fed Stimulus, Earnings Worries

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Renewed concern that the Federal Reserve will soon throttle back its support for the economy and warnings of weaker sales from two major companies sent stocks much lower Thursday.

The Dow Jones industrial average (^DJI) tumbled 225 points, or 1.5 percent to 15,112, the Standard & Poor's 500 index (^GPSC) surrendered 24 points, or 1.4 percent, to 1,661, and the Nasdaq composite index (^IXIC) lopped off 63 points, or 1.7 percent, to 3,606.

More signs that the economy was slowly recovering appeared to weigh on the market. An improving economy raises the likelihood that the Fed will start backing off its monthly purchase of $85 billion in bonds. Many investors believe that the Fed's effort has underpinned the recent bullish stock market.
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Among the numerous economic reports released Thursday were those that showed confidence among homebuilders rising to an eight-year high in August and weekly claims for jobless benefits falling to a near six-year low. Mortgage-buyer Freddie Mac also reported that mortgage rates held steady in the latest week, giving prospective homebuyers more time to lock in historically low levels.

Fresh data released Thursday also showed consumer prices rose broadly last month, and the number of foreclosures recorded in July fell 31 percent, putting the U.S. on track to end the year with the fewest home repossessions since 2007.

Data on manufacturing, meanwhile, were less encouraging, though economists were little fazed and said it merely suggested the improvement in factory activity was slower than had been anticipated.

In company news, Walmart Stores (WMT) shares fell 2.5 percent to $74.45 after the discount retailer posted disappointing same-store sales and missed revenue estimates for a fifth consecutive quarter. The company also lowered its revenue and profit forecasts for the year.

And Cisco Systems (CSCO) fell 7.1 percent to $24.48 as a slew of brokerages cut their price targets on the stock. The network equipment maker said Wednesday it will cut 4,000 jobs, or 5 percent of its workforce, as sales slow.

More Stocks in the News:
  • Shares of Cisco's smaller rivals, Ciena Corp. and F5 Networks, also ended lower. Ciena (CIEN) fell 5.6 percent to $21.24 while F5 Network (FFIV) slipped around 3.6 percent to $89.22.
  • One of the few bright spots in retail earnings was Kohl's (KSS), which reported a rise in quarterly same-store sales, sending its stock up 5.3 percent to $53.54.
  • Real-estate stocks headed lower on expectations that interest rates would rise. Equity Residential (EQR) lost 1.5 percent to $51.79, while Kimco Realty (KIM) dropped 2 percent to end at $21.29.
  • Billionaire investor George Soros added another 2 million shares to his stake in struggling retailer J.C. Penney (JCP), regulatory filings showed. The retailer's stock rose 5.5 percent to $13.83.
  • Warren Buffett's Berkshire Hathaway shed its stake in newspaper and broadcasting company Gannett Co. (GCI), which sent shares of Gannett falling 5.1 percent to $24.29.
  • Gun-maker Smith & Wesson Holding's (SWHC) shares dropped 7.9 percent to $11.22 after a KeyBanc analyst downgraded the stock to "underweight" from "hold," citing recent outsized gains in the stock's price, coupled with lower retail demand.
What to Watch Friday:
  • At 8:30 a.m. Eastern time, the Commerce Department releases housing-starts data for July, and the Labor Department releases second-quarter productivity data.
  • The University of Michigan reports its initial reading of August consumer sentiment at 9:55 a.m.
-Compiled from staff and wire reports.


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Markets

S&P 500 2,388.77 1.32 0.06%
DJIA 20,981.33 6.24 0.03%
NASDAQ 6,048.94 23.71 0.39%
DAX 12,443.79 -29.01 -0.23%
NIKKEI 225 19,251.87 -37.56 -0.19%
HANG SENG 24,698.48 120.05 0.49%
USD (per EUR) 1.09 0.00 -0.41%
USD (per CHF) 0.99 0.00 0.15%
JPY (per USD) 111.22 0.03 0.03%
GBP (per USD) 1.29 0.01 0.39%

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