Stocks slide on Wall Street

Warnings of weaker profits helped pull the US stock market down yesterday, despite some positive economic news.

Stocks slide on Wall Street

Warnings of weaker profits helped pull the US stock market down yesterday, despite some positive economic news.

American Eagle plunged 12% after the retailer slashed its earnings forecast in half on Monday, blaming weak sales. The company said cutting prices on clothing to lure in shoppers was hitting its profit margins.

Two of American Eagle’s rivals also slumped. Abercrombie & Fitch lost 4% and Urban Outfitters lost 3%.

Most companies have reported better results during the second-quarter earnings season, but sales have slowed.

A growing list of companies, including eBay and Marriott, has told analysts to lower their expectations for the coming quarters. The overall picture has left investors with little reason to cheer.

“Earnings have been moving up, just not spectacularly,” said Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors.

“We’d be much happier to see better revenue growth than what we’ve seen.”

Analysts expect companies in the Standard & Poor’s 500 index to post earnings growth of 4.4% in the second quarter. But revenue is on track to shrink 0.6%.

Major indexes headed lower from the opening bell yesterday, bottomed out around 11am local time, then slowly recovered some of their losses. The Dow Jones industrial average was down as much as 138 points.

By the end of the day the Dow was down 93.39 points, or 0.6%, to close at 15,518.74.

The S&P 500 index lost 9.77 points, or 0.6%, to 1,697.37. All 10 sectors in the S&P 500 fell.

The Nasdaq composite dropped 27.18 points, or 0.7%, to 3,665.77.

IBM fell the most in the Dow following reports that the company would require some workers to take time off this month as hardware sales slow. Credit Suisse also cut its rating on the company. IBM dropped 2%.

In economic news, the government reported record US exports in June and new data was released showing that home prices are rising sharply.

The stock market remains near record highs. The S&P 500 index closed above 1,700 points for the first time last week and rose in five of the past six weeks.

The S&P, a benchmark for most equity mutual funds, is up 19% this year, already ahead of its 13% gain in 2012.

Speculation that the Federal Reserve could start easing off its support for the economy helped knock commodity prices down.

Charles Evans, who votes on the Fed’s policy as president of the Federal Reserve Bank of Chicago, said the Fed could start scaling back its bond buying later this year.

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