Stocks drop on mixed economic news; Wal-Mart falls
New York • Investors retreated from U.S. stocks Thursday after disappointing earnings from Wal-Mart and mixed news about the economy.
KEEPING SCORE: The Standard & Poor's 500 index fell 18 points, or 1 percent, to 1,871 as of 3:10 p.m. Eastern time. The technology-focused Nasdaq composite slid 29 points, or 1 percent, to 4,071. The Dow Jones industrial average was down 180 points, or 1.1 percent, to 16,433. It was second day of sharp declines for the blue-chip index. On Wednesday, the Dow's 101-point drop ended a five-day winning streak.
RETAIL STILL CHILLY: Wal-Mart Stores fell $1.88, or 2.4 percent, to $76.86. The company reported lower earnings for its most recent quarter and warned that things don't look much better for the current period. The company, like many other retailers, blamed harsh winter weather. Department store operator Kohl's also fell after announcing a drop in first-quarter earnings. Its comparable-store sales fell 3.4 percent. Analysts were looking for a slight uptick.
FACTORY SLOWDOWN: U.S. industrial production dropped in April, the Federal Reserve said Thursday, possibly due to more bad weather. Factory output, which excludes mines and utilities, fell by 0.4 percent. Another manufacturing-related report, the Philadelphia Fed Index, fell short of expectations.
JOBS: One positive economic report was jobless claims. The Labor Department said the number of people who filed for unemployment benefits fell to its lowest level in seven years last week. Weekly unemployment benefit applications fell by 24,000 to 297,000. Economists had predicted a much smaller drop in jobless claims applications.
THE QUOTE: "People are just a little bit nervous about the entire global economic environment at the moment," said Ryan Larson, head of U.S. equities at the Royal Bank of Canada.
BUYING SAFETY: Investors sold stocks and bought bonds. The yield on the U.S. 10-year note fell below 2.5 percent for the first time in 2014. The falling yield, which began the year at 3 percent, has surprised many investors this year. Many thought the improving economy and the reduction in the Federal Reserve's bond-buying program would push yields up. There was talk among traders that foreign buyers have raced into the U.S. Treasury market looking for safety, which might be distorting the move in bonds. Despite their fall, yields of U.S. government bonds are higher than those of some developed economies.
"This flight to quality is overwhelming bond investors," said Tom di Galoma, a fixed-income trader at ED&F Man Capital.
PRICE POP: U.S. consumer prices rose at their fastest pace in nearly a year in April, the Labor Department said Thursday. The consumer price index, an often-quoted barometer of inflation in the U.S., rose by 0.3 percent last month due to higher food and gas prices. Inflation is on pace to rise 2 percent this year. While not alarming, it is noticeably higher than a year ago.
CISCO SURGE: Telecommunications equipment maker Cisco jumped $1.59, or 7 percent, to $24.40. Cisco reported an adjusted profit of 51 cents a share, three cents better than expectations.