clear
Tuesday August 4th, 2015 1:30AM

Dow down 225 points, its worst day in nearly 2 months

By The Associated Press
NEW YORK (AP) -- Grim sales forecasts from two major companies and concern that the Federal Reserve will soon start withdrawing its support for the economy pummeled the stock market Thursday.

The Dow Jones industrial average slumped 225 points, its worst day in nearly two months. Investors also dumped bonds, driving the yield on the 10-year Treasury note to its highest level in more than two years.

Before the start of trading, Wal-Mart cut its estimates for annual revenue and profit, warning that cautious shoppers are spending less. The news followed a disappointing revenue forecast from Cisco Systems late Wednesday.

In a twist, more signs of resilience in the U.S. economy weighed on the stock market. Reports on inflation and the job market appeared to raise the odds that the Fed would begin winding down its massive bond-buying program as early as next month. Many investors think that the Fed's effort has underpinned the stock market's record run.

"People are worried that this move up in interest rates will kill the recovery, and we won't see the anticipated second-half improvement in growth and corporate earnings," said Alec Young, global equity strategist at S&P Capital IQ.

The Standard & Poor's 500 index fell 24.07 points, or 1.4 percent, to 1,661.32. The selling swept across all 10 industry groups in the index.

The Dow lost 225.47 points, or 1.5 percent, to 15,112.19. The Nasdaq composite index fell 63.16 points, or 1.7 percent, to 3,606.12.

"It seems like an overreaction today," said Randy Frederick, managing director of active trading and derivatives at the Schwab Center for Financial Research.

Frederick said many investors are speculating that the improving economy means the Fed will start pumping less money into the financial system in the coming months. If that results in lower bond prices and even higher yields, it could lead more investors to dump dividend-paying stocks in favor of bonds.

"Some of the stocks getting hit hardest recently are big companies paying dividends," Frederick said. Utilities stocks are down 3 percent this week, for example, the worst of the S&P 500's industry groups.

The government said early Thursday that the number of Americans applying for unemployment benefits dropped to 320,000 last week. That's the lowest level since October 2007, two months before the start of the Great Recession.

A slowly improving economy should eventually lead to higher spending and more sales for big companies. But that's down the road. Right now, investors are more focused on the Fed's next move, said Natalie Trunow, the chief investment officer at Calvert Investments.

"There's this counter-intuitive reaction to economic news," Trunow said. "Positive data comes out and markets aren't excited about it. They say, `Uh-oh, the stimulus will be removed.' "

Wal-Mart fell $1.99, or 3 percent, to $74.41 after the world's largest retailer cut its profit and revenue forecasts for 2013. It also reported second-quarter results that missed Wall Street's estimates.

Cisco Systems announced plans to cut 5 percent of its workforce, roughly 4,000 employees, as sales slow. CEO John Chambers called the global economy "challenging and inconsistent." Cisco plunged $1.89, or 7 percent, to $24.48, the biggest drop of the 30 big companies in the Dow.

Cisco's announcement led to selling in other technology stocks, as it's widely regarded as a bellwether for the entire industry. That's because the company sells a wide range of products to corporations and governments and its fiscal quarters end a month later than most major technology companies, which gives investors an early look into current conditions.

The Dow has slumped 2 percent this week, and the S&P 500 is down 1.8 percent.

The stock market reached all time-highs on Aug. 2. The Dow is still up 15 percent in 2013; the S&P 500 up 16 percent.

In the market for U.S. government bonds, the yield on the 10-year Treasury note jumped as high as 2.81 percent, the highest level since July 2011. The yield drifted back to 2.77 percent in the afternoon, up from 2.71 percent late Wednesday.

Higher long-term interest rates could cool housing sales because the 10-year U.S. government bond acts as a benchmark for interest rates on mortgage loans.

"A sharp increase in long-term rates translates into a sharp increase in mortgage rates," Trunow said. "That's bound to impact the housing market."
© Copyright 2015 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
S&P 500 index has its best year since 1997
The stock market closed out a record year with more all-time highs on Tuesday, giving U.S. indexes their biggest annual gains in almost two decades.
6:56PM ( 1 year ago )
Colorado readies for 'Green Wednesday' pot sales
Police were adding extra patrols around pot shops in eight Colorado towns that plan to allow recreational sales to anyone over 21 on Jan. 1.
1:52PM ( 1 year ago )
Kerry seeks framework for Mideast peace talks
A senior State Department official says Secretary of State John Kerry will try this week to get Israel and the Palestinians to agree on a framework for negotiating a final peace agreement, yet cautions against raising expectations for Kerry's latest round of shuttle diplomacy.
1:35PM ( 1 year ago )
U.S. News
Missing Ga. bank director arrested in Brunswick
A bank director accused of losing millions of investors' dollars before vanishing last year was arrested Tuesday during a traffic stop in a city in south Georgia.
7:00PM ( 1 year ago )
Amtrak to suspend some Crescent service in Jan., Feb.
Amtrak service will shut down in parts of the Southeast for several days in January and February for rail maintenance by Norfolk Southern Railway.
9:00AM ( 1 year ago )
Lung cancer scans urged for some smokers, not all
Certain current or former heavy smokers should start getting yearly scans for lung cancer to cut their risk of death from the nation's top cancer killer, government advisers said Monday - even as they stressed that the tests aren't for everyone.
7:26AM ( 1 year ago )
Business News
Sex offender held in Hall County for failing to register
A 47-year-old man was booked into the Hall County Jail Tuesday, being held without bond for allegedly failing to register as a sex offender, his second such arrest.
6:09PM ( 1 year ago )
Pharmacy robberies may involve same suspect
Oakwood Police Tuesday afternoon released details in a pharmacy robbery they're investigating, similar to one that happened in the Hall County Tuesday morning.
5:46PM ( 1 year ago )
Victim critical following apartment fire
A 41-year-old woman was in critical but stable condition Tuesday after being rescued from an apartment fire in Forsyth County late Monday afternoon.
3:16PM ( 1 year ago )
Local/State News
GOP hopefuls take on illegal immigration in debate preview
MANCHESTER, N.H. (AP) — The Republican Party's presidential class demanded aggressive steps to curb illegal immigration, seizing on a delicate political issue while facing off in New Hampshire on Mond...
11:05PM ( 2 hours ago )
Structural issues delay Clarkesville downtown redevelopment
Clarkesville leaders learned Monday night the downtown redevelopment planned for the east side of the Clarkesville Square will be delayed due to structural issues.
11:05PM ( 2 hours ago )
Report: US-led strikes in Iraq, Syria killed 459 civilians
BAGHDAD (AP) — U.S.-led airstrikes targeting the Islamic State group in Iraq and Syria have likely killed at least 459 civilians over the past year, a report by an independent monitoring group said Mo...
9:09PM ( 4 hours ago )
Helen officials hash out city park changes
Discussions are continuing about the future of Helen Riverside Park.
7:57PM ( 5 hours ago )
Delta says it's banning shipment of hunting 'trophies'
Delta Air Lines had a major change of heart about shipping hunting trophies, announcing Monday afternoon that it would no longer accept lion, leopard, elephant, rhinoceros and buffalo trophies.
6:34PM ( 6 hours ago )