U.S. equity markets extended their downslide into the closing bell on Wednesday as traders digested the latest round of earnings, and economic data.
The Dow Jones Industrial Average was 157 points lower, or 0.92% to 16924. The S&P 500 shed 9 points, or 0.47% to 1994, while the Nasdaq Composite dropped 13 points, or 0.29% to 4782.
Consumer staples dropped the most on the session. Energy and materials were the lone sectors on the positive side.
Wal-Mart (NYSE:WMT) was the biggest decliner on the Dow, dragging the index down triple-digits after the world’s biggest retailer said at an investor meeting the strong dollar would force net sales growth for the fiscal year 2016 to be flat. The company also warned currency headwinds will cut revenue for 2015 by $15 billion.
Wal-Mart added that higher wages are likely to hit the company’s profits as it sees earnings per share declining between 6% and 12% in fiscal 2017.
Shares of the world’s biggest retailer plunged 10% on the news, shaving 44.8 points off the Dow. For context, Wal-Mart is the biggest year-to-date loser for the index, down 28.3%. The selloff on Wednesday marked the biggest one-day decline in 27 years for the company.
At the same time, Wal-Mart also unveiled a $20 billion share buyback over the next two years as it looks to “reinforce our continued commitment to delivering increased value to shareholders.”
Shares of other big retail names including Target (NYSE:TGT), Best Buy (NYSE:BBY), and J.C. Penney (NYSE:JCP) fell in sympathy.
Meanwhile, two bellwether firms set a gloomy tone to earnings season after the bell on Tuesday, which helped limit enthusiasm on Wednesday.
JPMorgan Chase (NYSE:JPM) reported a miss on both lines in the third quarter. The nation’s biggest bank by assets said it earned an adjusted profit of $1.32 a share on revenue of $23.54 billion. The results missed expectations for $1.37 in profits per share on revenue of $23.69 billion. Shares of the bank sagged 2.5%.
“Being the nation’s largest bank, J.P. Morgan is closely watched as a bell-weather for the financial sector. As a result, the tone has been set for the space and it will not trigger a great deal of enthusiasm,” Peter Kenny, market strategist, wrote in a note.
Intel (NASDAQ:INTC) shares gained 2.3% after reporting a beat on both lines, but lowering its revenue expectation due to weak demand for personal computers.
Despite the downbeat start, a new day brought a new set of earnings to digest. Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC) ushered in the second day of bank earnings with results that topped views.
Wells Fargo, the fourth-largest bank by assets in the U.S. beat expectations on both lines. The bank said revenue from its mortgage banking unit fell 2.7% during the reporting period as applications for new home loans have seen a 25% decrease since the beginning of the year, according to the Mortgage Bankers Association.
Bank of America also beat expectations. However, the second-biggest bank by assets revealed a lower profit from a year ago after a multi-billion dollar mortgage settlement with the government.
Netflix (NASDAQ:NFLX) was expected to report its latest results after the closing bell.
While traders shifted focus to third-quarter reporting season, they continued to eye developments in the macro landscape as the Federal Reserve comes closer to hiking short-term interest rates.
On Wednesday, data from the Commerce Department showed retail sales rose 0.1% in September, slightly below the 0.2% expected tick higher. Excluding the volatile auto sector, sales fell 0.3%, compared to forecasts for a 0.1% decline. The Labor Department, meanwhile, reported prices at the wholesale level fell 0.5% during September, a bigger decline than the 0.2% estimate.
The Fed released the latest current conditions across its 12 districts in the anecdotal Beige Book report, which offered few clues in the rate-hike debate. The Fed did say that wage growth “remained subdued” in most districts and economy activity continued at a pace of “modest expansion.”
The Beige Book “continues to indicate a divergence between the services and manufacturing sectors, while employment growth remains stable and wage growth remains low,” Barclays said in a research note.
In an exclusive interview on the FOX Business Network’s Cavuto Coast to Coast, Richmond Fed President Lacker told Peter Barnes that his “views haven’t changed much,” adding that it’s not clear if the Fed will raise interest rates in October. Lacker dissented when the Fed decided to maintain near-zero rates.
Meanwhile, data overnight in China showed consumer inflation rose 1.6% from a year ago, a smaller increase than the 1.8% pick-up expected. Producer prices, meanwhile, fell for the 43rd consecutive month.
Deutsche Bank economists said in a note that the Fed’s communicated focus on external economic risks to the U.S. has cooled growth expectations for the domestic economy, but it’s not necessarily warranted.
“Domestic demand fundamentals remain solid in the U.S. and Europe, and data in China are far from suggesting a sharp slowdown – leaving the world’s three largest economies on reasonably sound footing…but the Fed first needs confirmation that the U.S. economy remains on track and that downside risks to China are limited – something we expect in the next few months,” the note said.
In recent action, the yield on the benchmark 10-year U.S. Treasury bond dropped 0.074 percentage point lower to 1.98%.
In commodities, global oil prices recovered late in the session. U.S. crude prices lost two cents to $46.64 a barrel, while Brent, the international benchmark, paced about a penny higher to $49.69 a barrel.
Metals were mostly higher: Gold traded up 1.7% to $1,185 a troy ounce, while silver gained 1.3% to $16.12 an ounce. Copper was 1.1% higher to $2.41 a pound.