Wal-Mart Worry Pulls Down Dow
A disappointing sales forecast from Wal-Mart Stores helped send stocks mostly lower Monday as investors worried that oil prices, which fell for a second session, still might be high enough to curb consumer spending and hurt companies’ third-quarter earnings.
Some tech shares, however, eked out modest gains.
Wal-Mart’s warning about lower-than-expected August sales squelched optimism over falling oil prices. With its reach among consumers, Wal-Mart is seen as a barometer of an already struggling retail sector and the economy as a whole.
“I think you can make the case that Wal-Mart is related to oil, since oil prices have acted as a kind of tax on consumers that has restricted their spending,” said Joseph Keating, chief investment officer at AmSouth Asset Management in Birmingham, Ala. “I think this plays into people’s concerns that earnings will be impacted. But we’re also seeing oil fall, and barring some sort of major supply disruption, I think they’ll continue to fall.”
In New York, October crude oil futures slid 67 cents to $46.05 a barrel, the second consecutive decline, after Iraq said it boosted shipments to normal rates after two weeks of interruptions caused by worries over pipeline attacks by insurgents.
Also, Russian President Vladimir Putin told President Bush on Monday that Russian oil companies were increasing oil production and exports and would continue to do so, the White House said.
But the stock market couldn’t get much traction from the oil news.
However, very light volume meant most investors were sitting out Wall Street’s traditional summer doldrums.
The Dow Jones industrial average dropped 37.09 points, or 0.4%, to 10,073.05.
Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index fell 2.67 points, or 0.2%, to 1,095.68, and the tech-focused Nasdaq composite index was up 0.68 of a point, or 0.04%, at 1,838.70.
Declining issues outnumbered advancers by nearly 8 to 5 on the New York Stock Exchange.
Wal-Mart lowered its August sales forecasts, citing lower back-to-school sales and lost business in Florida from Hurricane Charley. Wal-Mart fell 85 cents to $53.80.
The retailer’s outlook adjustment gave pessimists the chance to adjust their portfolios and take money out of the market, analysts said. Most investors, however, remained on the sidelines, and little movement in stocks was expected this week, given the Republican National Convention next week as well as the release of August employment data next Friday.
In other market highlights:
* Treasury yields rose as some investors sold bonds. If oil prices continue to fall, the economy could strengthen, which would make it more likely the Federal Reserve would continue to tighten credit, analysts said. The yield on the benchmark 10-year note rose to 4.28%, up from 4.23% on Friday.
* FedEx gained $1.65 to $80.95 after raising the outlook for its first quarter and 2005 earnings, crediting strong international express and ground shipments. Rival UPS added 23 cents to $71.54.
* World Wrestling Entertainment saw its first-quarter earnings more than double, thanks to strong home video and pay-per-view sales of its wrestling extravaganzas. But WWE, which lowered its outlook for fiscal 2005, dropped 24 cents to $11.66.
* In the tech sector, Intel gained 27 cents to $21.89, Broadcom rose 90 cents to $31.10 and Cisco Systems was up 30 cents to $19.18.
