U.S. stocks sank the most since June as reports from Cisco Systems Inc. and Wal-Mart Stores Inc. disappointed while improving economic data fueled concern the Federal Reserve will reduce stimulus.
The Standard & Poor’s 500 Index lost 1.4%, the most since June 20, to 1,661.32 at 4 p.m. in New York. The Dow Jones Industrial Average dropped 225.47 points, or 1.5%, to 15,112.19, the lowest level since July 3.
“With weaker earnings, higher interest rates and geopolitical concerns, risk assets like stocks don’t do well in that type of environment,” Jim Russell, the senior equity strategist for U.S. Bank Wealth Management, said in an interview for Bloomberg. “The jobless claims numbers were sufficiently strong that taper fears are probably front and center in terms of display today.”
James Bullard, president of the Federal Reserve Bank of St. Louis, said that, although the economy has improved, it might not be strong enough for the Fed to decide to shrink stimulus as soon as its September meeting. Some investors took those comments, together with the manufacturing news and the corporate reports, as signs the Fed might choose to delay any stimulus cuts. But others were concerned the Fed might act anyhow, running the risk that the economy could suffer a setback from its move.
In corporate news, Wal-Mart, the world’s largest retailer, slid 2.6% to $74.41. The world’s largest retailer cut its annual profit forecast after shoppers’ reluctance to buy more than the bare necessities hurt second-quarter sales.
Cisco slumped 7.2% to $24.49 as the biggest maker of networking equipment said revenue for the current quarter through October will be $12.2 billion to $12.5 billion. Analysts on average had projected sales of $12.5 billion. The company is laying off 4,000 workers amid weaker sales in Japan, China and Europe, Chief Executive Officer John Chambers said on a conference call yesterday.
Hewlett-Packard Co. fell 4.5% to $25.95. Rival Lenovo Group Ltd. reported first-quarter profit that beat analyst estimates after increasing its global market share for tablet computers, smartphones and personal computers.
Onyx Pharmaceuticals Inc. declined 7.2% to $115.34. Talks over Amgen Inc.’s proposed takeover of the maker of blood-cancer medication have stalled over a dispute about access to data from an ongoing drug trial even as the two sides have a general agreement on price, said three people familiar with the matter.
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