U.S. Stocks Fall Sharply
DOW JONES & COMPANY, INC. 2:30 PM ET 07/31/14
Symbol Last Price Change
XOM 100.26 -2.99 (-2.9%)
WFM 38.23 -0.88 (-2.25%)
AKAM 59.33down -1.4 (-2.31%)
ABDNF 7.01up -0.15 (-2.09%)
YUM 69.191 -3.809 (-5.22%)
QUOTES AS OF 02:31:45 PM ET 07/31/2014
U.S. stocks fell sharply, on course to snap a five-month winning streak for the broad stock market.
Traders said there was no single catalyst for the selling, which came on the heels of broad losses in European shares.
U.S. traders pointed to disappointing earnings reports Thursday, which disrupted what has been a strong season for corporate profits. An upbeat reading from the labor market, meanwhile, sowed some concerns about the Federal Reserve moving quicker than had been expected to pull back on its easy money policies.
The Dow Jones Industrial Average fell 221 points, or 1.3%, to 16658 in afternoon trading. The S&P 500 shed 28 points, or 1.4%, to 1942 and the Nasdaq Composite Index dropped 69 points, or 1.6%, to 4393.
Thursday's tumble dragged the Dow and S&P 500 lower for July, leaving the blue-chip benchmark down 0.9% and the S&P 500 down 1%. Still, the Dow is up 0.5% for the year and the S&P is up 5.1%.
"People are taking profits and they are a little nervous," said Ian Winer, director of equity trading at Wedbush Securities.
The CBOE Volatility Index, an options-based measure of expected market swings, rose 20% to 16.05, its highest level since April.
Trading in single stocks was heavier than in recent days. Wall Street trading desks said they also saw a steady flow into index-tracking exchange-traded funds as investors looked to hedge existing positions and shifted to more defensive postures.
Recent stock gains, mixed economic signals and concerns about Fed policy changes makes it difficult to have high conviction in stocks, said Nico Marais, head of multi-asset investments and portfolio solutions at Schroder Investment Management. Mr. Marais said that he has been trimming some stock positions and raising cash in recent weeks.
"We've been through a period of relative calm in the markets and not seen a selloff for some time," he said. " There's a sense of complacency. This is not the time to be adventurous in the markets."
Earnings season has been generally positive, but a series of lackluster reports weighed on the market Thursday.
Exxon Mobil (XOM) fell 2.4% after its second-quarter earnings rose 28% but production declined.
Whole Foods Market (WFM) fell 3.5% after cutting its full-year sales projection for the fourth time in nine months in its quarterly earnings report.
Akamai Technologies (AKAM) dropped 2.2% after posting second-quarter results that fell short of some high-end estimates.
Declines were broad, with technology and energy stocks leading all 10 of the S&P 500's industry groups lower. Each of the Dow's 30 stocks lost ground.
Riskier corners of the market suffered most. The Russell 2000 index of small company shares dropped 2.2%, extending its monthly drop to 5.7%, the biggest monthly decline since May 2012.
The Fed's Wednesday policy statement delivered mixed signs about the economy. It noted less conviction that the central bank believes that inflation will remain low, but also that it sees "slack" in the labor market.
"The market is slightly torn on what to make of it all," said Luke Bartholomew, investment manager at Aberdeen Asset Management(ABDNF), which oversees about $541 billion.
Some market players voiced concern that improving U.S. economic data could prompt the Fed to raise rates sooner than some expect. On Wednesday, data showed the U.S. economy expanded by 4% in the second quarter, topping estimates.
"Better economic data puts into place the realization that the Fed is probably going to have to act sooner rather than later to be easing off the pedal," said Hank Smith, chief investment officer at Haverford Trust, which oversees about $6.5 billion.
On Thursday, claims for unemployment aid in the past week came in slightly better than expected, at 302,000, while the prior week's figure was revised down to 279,000, a 14-year low.
Attention turns to Friday's monthly employment report, which is expected to show that the U.S. economy added 230,000 jobs in July. The unemployment rate is expected to be steady at 6.1%.
The Chicago Business Barometer fell 10 points to 52.6, far below expectations of 63.0, its lowest since June 2013.
Yields on benchmark 10-year Treasury notes reversed course midday, falling to 2.555%, from 2.556% in late trading on Wednesday.
Stocks tumbled in Europe, with the Stoxx Europe 600 down 1.3%. Shares of Banco Espírito Santo slumped after the bank reported a record net loss for the second quarter that highlighted the extent of financial troubles besetting its parent groups.
In commodity markets, gold futures fell 1% to $1,283.70 a troy ounce and crude-oil futures fell 1.9% to $98.41 a barrel. The dollar inched higher against the euro and was nearly flat versus the yen.
Asian markets ended mostly higher. China's Shanghai Composite rose 0.9%. Japan's Nikkei Stock Average slipped 0.2%.
Yum Brands (YUM) fell 5.3%. The company said same-store sales at Chinese locations of its KFC(YUM) and Pizza Hut restaurants have declined because of news concerning Shanghai Husi Food Co., which has been accused of intentionally selling expired meat to restaurant companies. Yum Brands(YUM) said on July 20 it stopped orders from Shanghai Husi.
Yelp fell 11% after concerns about the number of businesses added in the second quarter trumped the company's first quarterly profit since its 2012 initial public offering.
Synchrony Financial, the largest U.S. initial public offering so far this year, was flat at its $23 price after briefly dropping below that level. The credit-card issuer was spun off from General Electric.
Write to Chris Dieterich at christopher.dieterich@wsj.com
(END) Dow Jones Newswires
07-31-141430ET
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