Wall St declines as Wal-Mart's weak forecast drags on retailers

S&P 500 profits forecast drop more than 4% in the third quarter compared with a year ago

US stocks fell on Wednesday as Wal-Mart skidded after issuing a weak profit forecast, dragging down other big retailers, and as JPMorgan slipped after disappointing results.

The news added to worries about the outlook for US earnings, with S&P 500 profits forecast to have dropped more than 4% in the third quarter compared with a year ago, according to Thomson Reuters data.

Following the market close, shares of Netflix sank 8.7% to $100.61 after the company reported US subscriber additions below its own forecast.

Separately, CNBC said supermarket operator Albertsons' initial public offering was likely to price at $20 or less as bidders are concerned about the Wal-Mart forecast, while First Data's IPO is likely to price at $16. Earlier this month, Albertsons said it expected its IPO to price between $23 and $26 per share, and First Data estimated its would price between $18 and $20 a share.

 

During the regular session, Wal-Mart sank 10% to $60.03 in its biggest one-day percentage decline in years and its heaviest trading day since January 2009, after it forecast a drop of up to 12% in earnings per share in fiscal 2017. The decline erased about $22 billion off the retailer's market value, and the stock was the biggest drag on both the Dow and S&P 500.

Also weighing on retailers, data showed retail sales in the United States barely rose in September.

Target was down 3.5% at $76.20, and Sears fell 3.0% to $24.41. The S&P 500 retail index dropped 1.2%.

JPMorgan shares fell 2.5% to $59.99 after the bank reported disappointing third-quarter results late on Tuesday.

"In these next three weeks in the earnings season, we're going to get some clear guidance not just on earnings for the third quarter but guidance for the fourth quarter and for next year. That's going to be crucial," said John Canally, investment strategist and economist for LPL Financial in Boston.

The Dow Jones industrial average fell 157.14 points, or 0.92%, to 16,924.75, the S&P 500 lost 9.45 points, or 0.47%, to 1,994.24 and the Nasdaq Composite dropped 13.76 points, or 0.29%, to 4,782.85.

Wells Fargo fell 0.7% to $51.50, while Bank of America rose 0.8% to $15.64 both following results.

Among other big decliners, shares of Boeing dropped 4.3% to $134.22. Delta Air Lines' chief executive said he expects the market to be "ripe" for the carrier to buy used widebody planes over the next 12 to 36 months, as low interest rates have created a market bubble. Delta shares were up 1.8% at $48.59. Declining issues outnumbered advancing ones on the NYSE by 1,809 to 1,241, for a 1.46-to-1 ratio on the downside; on the Nasdaq, 1,759 issues fell and 1,005 advanced for a 1.75-to-1 ratio favouring decliners.

The S&P 500 posted seven new 52-week highs and 5 new lows; the Nasdaq recorded 21 new highs and 57 new lows.

About 6.9 billion shares changed hands on US exchanges, compared with the 7.5 billion daily average for the past 20 trading days, according to Thomson Reuters data.