Disney, Apple Spoil Week for Stocks as Dow Reaches Six-Month Low

Fresh signs the U.S. economy is picking up steam were no match for worries about iPhone sales and the future of ESPN.

U.S. stocks retreated in the week as Walt Disney Co. sank the most in four years and Apple Inc. tumbled into a correction. The Dow Jones Industrial Average dropped 1.8 percent, capping a seven-day slide that is its longest since 2011. Media and biotechnology shares joined commodity producers in a selloff that sent the Standard & Poor’s 500 Index below its average price for the past 100 days and briefly erased year-to-date gains in small caps.

While data showing a robust labor market and the fastest services sector expansion in a decade provided fresh signs the economy is vital enough to withstand higher interest rates, investors sold some of the bull market’s biggest winners amid concerns a slowdown in global growth and a strong dollar will erode corporate profits.

“From a macroeconomic standpoint things appear to be pretty good, but the market continues to slide,” said Phil Orlando, who helps oversee $360 billion as chief equity-market strategist at Federated Investors Inc. in New York. “There’s a lot of nervousness there.”

The S&P 500 fell 1.2 percent to 2,077.57 in the five days. Losses were heaviest among media companies, as disappointing results from Disney, owner of the ESPN cable network, sparked selling that spread after other television and publishing companies’ profit fell. Energy and mining shares also tumbled, as oil capped a sixth weekly slide amid speculation a global glut will be prolonged.

Media Rout

While the commodities selloff only deepened a yearlong rout, the retreat from media shares marked a turnabout for some longtime market darlings. The 15-member S&P 500 Media Industry Index capped its worst week since 2011 with a 7.5 percent rout. The group has risen more than 450 percent since equities bottomed in 2009, second only to automakers in the S&P 500.

The selling in many of this year’s best performers -- Disney had topped the Dow through July -- sent the the iShares MSCI USA Momentum Index Fund down 1.9 percent for the week. The gauge underperformed the S&P 500 by 0.7 percentage point over the last five trading sessions, the biggest weekly gap since the five days ended May 1.

Even Apple, the stock that has done the heaviest lifting during the 6 1/2 year bull run, took a beating. The iPhone maker sank 4.8 percent in the week, bringing its slide from a February high to 13 percent, amid signs of a slowdown in China that stoked worry one of the company’s major markets will shrink.

Very Concerned

“Investors are still very concerned about the prospects for growth globally and continue to see softness,” said Eric Wiegand, a senior portfolio manager at U.S. Bank Wealth Management in New York. “We’ve seen less bad data coming out of China, but there’s still a great deal of suspicion there. The market has become increasingly narrow.”

As worries about global growth persist, the U.S. economy continues to signal strength. Data in the week showed a broad-based gain in hiring and sizzling growth in the industries that make up almost 90 percent of the economy.

The jobs report, in particular, boosted the chance of a Fed rate hike in September by four percentage points to 54 percent, according to futures trading data compiled by Bloomberg.

“If the Fed was going into this report thinking a September interest raise, this report confirms it,” said Joe “JJ” Kinahan, chief strategist at TD Ameritrade Holding Corp. “The market is under a bit of pressure so this report is adding to it. The market overall is trying to see where leadership will come from. Until we have that, we will continue to drift lower.”

Earnings, Oil

Investors took little solace from corporate earnings that largely exceeded forecasts. Some 88 percent of S&P 500 members have released results this season, with three-quarters beating profit estimates and half topping sales projections.

The dollar ended the week near a four-month high, stoking concern that U.S. products will be less appealing in overseas markets and contributing to a commodities rout that left oil below $45 a barrel in New York.

Energy shares registered a 14th straight weekly decline, the longest in data going back to 1989, while an index of resource producers retreated 1.6 percent.

The Russell 2000 Index tumbled 2.6 percent, as biotechnology and energy shares in the small-cap gauge bore the brunt of selling. The Nasdaq Biotechnology Index sank 3.6 percent to a one-month low. Almost 40 of its 145 stocks posted a double-digit percentage slide, trimming the index’s advance in 2015 to 21 percent.

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