MARKET SNAPSHOT: Dow Drops 100 Points As Disney, Retailers Weigh – Morningstar.com

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By Barbara Kollmeyer and Victor Reklaitis, MarketWatch

Investor express sadness over the Mouse House’s quarterly results

U.S. stocks retreated on Wednesday as sharp losses in retail shares and a steep drop in entertainment giant Walt Disney Co., after disappointing quarterly results, weighed on the broader market.

At its nadir in early trade, Disney was shaving as much as 40 points from the Dow industrials and helping to erode a 222-point rally in the blue-chip’s gauge on Tuesday.

Most recently, the Dow Jones Industrial Average fell 114 points, or 0.6%, to 17,813, led by Disney’s 4% selloff and a 3.4% drop in Wal-Mart Stores Inc. (WMT).

The S&P 500 gave up 10 points, or 0.5%, to 2,074, with eight of the 10 main sectors trading lower. Retailers like Staples Inc.(SPLS), Macy’s Inc.(M), and Michael Kors Holdings Ltd. (KORS) were among the worst performers dragging the S&P 500’s consumer-discretionary sector, off 1.7%. The consumer-discretionary sector is comprised predominantly of retailers.

Meanwhile, the Nasdaq Composite declined 20 points, or 0.4%, to 4,790.

(http://www.marketwatch.com/story/us-stocks-show-signs-of-struggle-as-oil-prices-pull-back-2016-03-02)”It’s clear that sentiment was dented by disappointing earnings today, especially by Disney, which has never missed earnings,” said Karyn Cavanaugh, market strategist at Voya Investment Management.

Cavanaugh sounded optimistic in her outlook for the rest of the year, however, despite the 7.5% decline in first-quarter profit growth.

“Earnings in the second quarter will also be negative but not as bad as in the first quarter and will improve in the second half of the year,” she said. Cavanaugh said she expects the Federal Reserve, which has maintained an ultraloose monetary policy, despite raising rates for the first time in December, to keep benchmark interest rates low.

Tuesday’s rally for stock markets surprised some investors who harbor concerns about corporate growth and economic sluggishness overseas.

“Yesterday’s global equity journey was strangely optimistic when much of the economic data has been a little light in recent times,” said David Buik, market commentator at Panmure Gordon & Co., in a note Wednesday. “As the threat of an increase in the Fed rate dissipates, investors girded up their loins buoyed by higher oil, better quality earnings and a feeling that perhaps markets had been oversold.”

“It wasn’t so much a euphoric session; it was just a question of sentiment improving,” Buik added.

Other markets: On Wednesday, West Texas intermediate crude (http://www.marketwatch.com/story/crude-prices-fall-on-sticky-worries-about-oversupply-issues-2016-05-11) jumped more than 2% to above $45 a barrel, but failed to lift energy stocks, which were barely in positive territory. European stocks (http://www.marketwatch.com/story/european-shares-under-pressure-as-jcdecaux-oil-prices-pull-back-2016-05-11) moved lower, while Asian markets (http://www.marketwatch.com/story/aussie-stocks-jump-as-oil-gains-but-other-asian-markets-mixed-2016-05-11) closed mixed. Gold futures gained, as the ICE U.S. Dollar Index pulled back.

Individual movers: Disney (DIS) was the biggest decliner within the Dow, after the entertainment giant late Tuesday posted weaker-than-expected quarterly results (http://www.marketwatch.com/story/disney-results-boosted-by-star-wars-zootopia-2016-05-10-164853110).

“Despite two blockbuster movies in ‘Star Wars’ and ‘Zootopia,’ Walt Disney failed to meet analysts’ expectations,” Buik said.

Read: Reactions to Disney’s big miss–still “significant value” in movies (http://www.marketwatch.com/story/reactions-to-disneys-miss-investors-have-been-spoiled-still-significant-value-in-films-2016-05-11)

Staples Inc.(SPLS) was the biggest loser within the S&P 500, diving 18% following news that its planned buyout of rival Office Depot Inc.(ODP) ended unsuccessfully (http://www.marketwatch.com/story/staples-office-depot-merger-killed-by-antitrust-claims-again-2016-05-10).

Macy’s Inc.(M) shares sank 10% after the retailer reported first-quarter sales that missed expectations (http://www.marketwatch.com/story/macys-shares-fall-in-premarket-after-sales-miss-expectations-outlook-lowered-2016-05-11) and issued a profit warning.

On the upside, Electronic Arts Inc.(EA) rose 14%, making it the best performing stock on the S&P 500. The maker of videogames late Tuesday reported better-than-expected quarterly results (http://www.marketwatch.com/story/ea-leans-on-star-wars-to-beat-consensus-2016-05-10).

Economic news: Investors are due to get federal budget data for April at 2 p.m. Eastern Time.

Oil and energy stocks could move on a weekly report on U.S. petroleum inventories that is expected at 10:30 a.m. Eastern.

No Federal Reserve officials are expected to deliver speeches Wednesday.

 

(END) Dow Jones Newswires

May 11, 2016 11:16 ET (15:16 GMT)

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