Warnings of slower sales drive US stocks sharply lower (VIDEO)
Thursday, August 15, 2013
NEW YORK (AP) — Warnings of weaker sales from two major companies and concern that the Federal Reserve will soon start withdrawing its support for the economy pummeled the stock market Thursday. The Dow Jones industrial average slumped 225 points, its worst day in nearly two months.
Before the start of trading, Wal-Mart cut its estimates for annual revenue and profit, warning that cautious shoppers are spending less.
The news followed a disappointing revenue forecast from Cisco Systems late Wednesday.
In a twist, more signs of resilience in the U.S. economy drove long-term interest rates to their highest level in two years and wound up rattling the stock market. Reports on inflation and the job market appeared to raise the odds that the Fed would begin winding down its massive bond-buying program next month. Many investors think that the Fed’s effort has underpinned the stock market’s record run.
“People are worried that this move up in interest rates will kill the recovery, and we won’t see the anticipated second-half improvement in growth and corporate earnings,” said Alec Young, global equity strategist at S&P Capital IQ.
The Standard & Poor’s 500 index fell 24.07 points, or 1.4 percent, to 1,661.32.
The selling swept across all 10 industry groups in the index.
The Dow lost 225.47 points, or 1.5 percent, to 15,112.19. The Nasdaq composite index fell 63.16 points, or 1.7 percent, to 3,606.12.
“It seems like an overreaction today,” said Randy Frederick, managing director of active trading and derivatives at the Schwab Center for Financial Research.
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