U.S. stocks fell a second day, with the Dow Jones Industrial Average sinking the most in a month, as investors continued to sell small-cap shares and Wal-Mart Stores Inc. forecast profit that missed estimates.
Wal-Mart fell 2.4 percent after the disappointing results. Lincoln National Corp. sank 5.2 percent, leading insurers lower as 10-year Treasury yields tumbled. General Motors Co. dropped 1.7 percent after recalling another 2.7 million vehicles. Cisco Systems Inc. advanced 6 percent after a revenue forecast that beat analysts’ projections.
The Standard & Poor’s 500 Index lost 0.9 percent, the most in a month, to 1,870.85 at 4 p.m. in New York. The Dow average declined 167.16 points, or 1 percent, to 16,446.81, its biggest drop since April 10. The Russell 2000 Index of small companies sank 0.7 percent, trimming an earlier slide of 1.9 percent. About 6.8 billion shares changed hands on U.S. exchanges, 2.3 percent above the three-month average.
“The primary sentiment right now is cautious and nervous,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “It’s more a matter of capital preservation than it is trying to generate returns. This is a time of caution. More people are looking to make sales and raise cash than they are to put cash to work on the weakness.”
The S&P 500 has dropped 1.4 percent since closing at an all-time high of 1,897.45 on May 13. The gauge advanced as much as 4.5 percent from a low on April 11 amid optimism about the economy and Federal Reserve stimulus.
The Russell 2000 has lost 3.3 percent in the past three days following a 2.4 percent rally on May 12. The gauge briefly fell 10 percent below a March high today. A close with the index down that much would meet the common definition of a correction.
The Dow Jones Internet Index lost 0.6 percent for a third day of declines. The gauge has plunged 18 percent from a 13-year high in March.
Economic data today showed industrial production in the U.S. unexpectedly declined in April, held back by a plunge in utilities as temperatures warmed and a broad-based decrease in manufacturing. Manufacturing, which makes up 75 percent of total production, decreased 0.4 percent.
That contrasted with a higher-than-forecast reading on the Fed Bank of New York’s gauge of regional manufacturing, which climbed to 19.01 this month, from 1.29 in April.
Labor Department data showed the fewest Americans in seven years filed applications for unemployment benefits last week, while a separate report indicated the cost of living in the U.S. rose in April by the most in almost a year.
“There’s not really any great news here,” Randy Bateman, who oversees $3.5 billion as chief investment officer of Huntington Asset Advisors in Columbus, Ohio, said by phone. “It’s just a slower growing period. Unless we see something that will really drive investor enthusiasm, it’ll be a trading-range market.”
Fed Chair Janet Yellen said last week that the world’s biggest economy still requires a strong dose of stimulus. While data show “solid growth” in the second quarter, “many Americans who want a job are still unemployed” and inflation remains low, she said. Yellen will address the U.S. Chamber of Commerce after the market closes today.
Three rounds of monetary stimulus have helped fuel economic growth, sending the S&P 500 surging as much as 180 percent from its 2009 low.
David Tepper, founder of $20 billion hedge-fund firm Appaloosa Management LP, said he’s nervous about markets as the U.S. economy isn’t growing fast enough amid complacency by the Federal Reserve.
“The market is kind of dangerous in a way,” Tepper said yesterday at the SkyBridge Alternatives Conference in Las Vegas. “I think it’s nervous time,” he said, adding that markets may “grind higher” in the near term.
Tepper, 56, who started his Short Hills, New Jersey-based firm in 1993, said he’s more worried about deflation than inflation and that this is the time to preserve money.
The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility known as the VIX, jumped 8.2 percent to 13.17, its biggest rally in a month. The gauge had fallen 43 percent through yesterday since reaching a two-year high on Feb. 3.
Nine of the 10 main S&P 500 groups retreated today, with commodity shares dropping 1.3 percent to pace declines. Phone stocks, which have the highest dividend yield in the index, added 0.2 percent.
Wal-Mart sank 2.4 percent to $76.83. The world’s largest retailer forecast second-quarter profit that missed analysts’ estimates as the company copes with slow sales in the U.S., especially at its Sam’s Club warehouse stores. First-quarter profit fell to $1.10 a share, with poor weather shaving off 3 cents a share. That trailed the $1.15-a-share estimate of analysts surveyed by Bloomberg.
Retailers in the S&P 500 fell 1.1 percent, with Kohl’s Corp. decreasing 3.4 percent to $52.21. The department-store operator reported sales and profit estimates that fell short of analysts’s forecasts. The stock fell the most since January.
Bristol-Myers Squibb Co. plummeted 6.1 percent to $48.93 for the biggest decline in the S&P 500. The drugmaker was downgraded to market perform from outperform by BMO Capital Markets after the company disclosed late yesterday preliminary results of clinical testing on one of its cancer treatments.
Lincoln National dropped 5.2 percent to $47.41 for its biggest slide since 2012, pacing losses among insurers, which sank 1.4 percent as a group.
The yield on 10-year Treasury notes slid five basis points to 2.50 percent. Life insurers invest in bonds to back future obligations and generate profits. MetLife Inc., the largest U.S. life insurer, sank 2.7 percent to $49.56.
General Motors dropped 1.7 percent to $34.36. The automaker announced that it is recalling an additional 2.7 million vehicles, including models with faulty brake lights that have led to hundreds of complaints, pushing the total number to 11.1 million.
Cisco rallied 6 percent to $24.18. The world’s largest network-equipment maker said revenue in the quarter ending July will be $12 billion to $12.3 billion. Analysts on average had predicted $11.8 billion. Cisco forecast profit excluding stock-based compensation, amortization and other items of as much as 53 cents a share. That exceeded the 51-cent average of analyst estimates compiled by Bloomberg.