A batch of negative company news gave US investors something to fret over.
A day after eking out its first record high of 2014, the stock market lost ground as electronics retailer Best Buy, Goldman Sachs and Citigroup, and railway firm CSX had disappointing earnings news.
Consumer discretionary companies and banks fell the most.
The Standard & Poor’s 500 index slipped 2.49 points, or 0.1%, to 1,845.89 - retreating from the all-time high it hit the day before.
Best Buy fell the most in the S&P 500 index after the company reported a decline in sales during the crucial holiday season. Its shares plunged 10.74 dollars, or 29%, to 26.83.
Investors had high hopes that Best Buy, which has faced intense competition from companies like Amazon.com, would put itself back on track. The stock soared 236% last year. However, the company said that the aggressive price-matching policy it offered during the holidays backfired and sales fell 0.8% compared to a year ago.
Best Buy is not the only retailer to disappoint investors the last week.
Bed Bath & Beyond, Family Dollar and Target all cut their full-year outlooks last week after a weak holiday season. The only bright spot in the retail industry was Macy’s, and even it announced layoffs of 2,500 employees as part of a restructuring.
The Dow Jones industrial average fell 64.93 points, or 0.4%, to 16,417.01. The Nasdaq composite had a modest gain of 3.8 points, or 0.1%, to 4,218.69.
Goldman Sachs was the biggest drag on the Dow, falling 3.58 dollars, or 2%, to 175.17.
The bank reported a drop in fourth-quarter profit due to problems in its mortgages and bond trading division. However, Goldman’s earnings did beat analysts’ expectations.
The bond and mortgage businesses were also weak at Citigroup, whose results fell short of expectations. The stock dropped 2.39 dollars, or 4%, to 52.60.
The stock market is “fragile” right now, said Scott Clemons, chief investment strategist at Brown Brothers Harriman.
“If something were to go wrong, like if this earnings season continues to disappoint, I think any negative market reaction would be magnified. The market is not as resilient as it was last year.”
The company disappointments were not limited to the retailers and banks.
CSX warned investors that it might be difficult to reach its own profit targets over the next two years because of ongoing weak demand for coal. The news pushed CSX down 1.99 dollars, or 7%, to 27.24. Other railway stocks including Union Pacific and Norfolk Southern were lower.
It’s still very early in earnings season. Roughly 70 members of the S&P 500 index report next week, including Microsoft, IBM, Delta Air Lines and McDonald’s.
Quincy Krosby, a market strategist with Prudential Financial, said the market desperately needs companies to deliver on expectations this quarter and should find more direction next week once more companies report.
“We need the economic data and corporate earnings to be strong enough to support these valuations,” he said.
Investors retreated into the traditional “safe havens:” government bonds, high dividend stocks and gold. The yield on the US 10-year Treasury note fell to 2.84% from a yield of 2.89% the day before. Bond yields fall as prices rise.
Gold rose 1.90 dollars, or 0.2%, to 1,240.20 an ounce.
- CEC Entertainment, the parent company of the Chuck E. Cheese pizza parlor chain, rose 6.32 dollars, or 13%, to 54.75. CEC agreed to be bought by the private equity firm Apollo Global Management for $950m.
- Nu Skin plunged 30.43, or 26%, to 84.80. Chinese officials accused Nu Skin of operating a pyramid scheme. Nu Skin, based in Provo, Utah, sells skin care and nutritional products through a direct-selling model.