Warnings of slower sales drive US stocks lower
NEW YORK — Grim sales forecasts 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. Investors also dumped bonds, driving the yield on the 10-year Treasury note to its highest level in more than two years.
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 weighed on 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 as early as 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.
A slowly improving economy should eventually lead to higher spending and more sales for big companies. But that’s down the road. Right now, investors are more focused on the Fed’s next move, said Natalie Trunow, the chief investment officer at Calvert Investments.
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