NEW YORK: Retail stocks slumped Wednesday after weak earnings from Macy’s fueled concerns about consumer spending.
The Dow Jones Industrial Average recorded its worst decline since Feb. 11, after posting its biggest gain since March on Tuesday.
For months, analysts and investors have been hoping for a broad-based revival in spending that could propel the U.S. economy, as consumers saved money at the gas pump and the job market improved. But consumer spending has decelerated for three quarters in a row, and the U.S. economy grew just 0.5% in the first quarter.
Oil prices remain low but have rebounded sharply this year—swings that could keep consumers on edge. U.S. crude oil rose 3.5% Wednesday to $46.23 a barrel, the highest settlement since early November, and has surged 76% since its February low.
“There’s some kind of hesitation with the U.S. consumer,” said David Donabedian, chief investment officer at Atlantic Trust Private Wealth Management. “That’s a big reason why the U.S. economy is really just limping along here.”
On Wednesday, the Dow Jones Industrial Average declined 217.23 points, or 1.2%, to 17711.12. The S&P 500 lost 19.93, or 1%, to 2064.46, and the Nasdaq Composite fell 49.19, or 1%, to 4760.69.
Macy’s shares lost $5.61, or 15%, to $31.38, the biggest one-day percentage drop since 2008. The retailer cut its forecast for the year amid slumping sales. “We are not counting on the consumer to spend more,” said Chief Executive Terry Lundgren.
Macy’s statements about consumer spending were dismal, said Doug Shapiro, equity trader at brokerage firm Raymond James. “When they put out comments like that, it’s hard to say they’re the only one” facing troubles, he added. Several retailers are scheduled to report results next week, including Target and Home Depot.
The SPDR S&P Retail exchange-traded fund fell 4.4%. Michael Kors Holdings shares slid 5.89, or 12%, to 44.01 and Nordstrom shares declined 3.43, or 7%, to 45.43.
The S&P 500’s consumer-discretionary sector, which includes retailers and media companies, fell 2%.
Walt Disney shares fell 4.31, or 4%, to 102.29, making it the worst performer in the Dow and shaving 30 points off the index. The company’s revenue and earnings for its fiscal second quarter, reported Tuesday, fell short of Wall Street expectations.
Staples shares tumbled 1.90, or 18%, to 8.46 after a federal judge Tuesday blocked the planned merger of Staples and rival Office Depot because of antitrust concerns. Office Depot shares sank 2.46, or 40%, to 3.63.
“The guidance from companies is that the environment continues to be tough and may be looking tougher,” said Thomas Melcher, chief investment officer at PNC Asset Management. While that should be bad news for stocks, the extremely low interest-rate environment has left investors with “a lack of alternatives” outside of stocks, he added.
On Wednesday, gold for May delivery rose 0.8% to $1,274.60 an ounce.
The yield on the 10-year U.S. Treasury note fell to 1.737%, from 1.760% on Tuesday. Yields fall when prices rise.
In late New York trading, the dollar fell 0.8% against the yen to ¥108.41. The euro rose 0.5% against the dollar to $1.1427.
