Disappointments From Disney, Macy's Trigger Wall Street Selloff
Disappointing starts to the year for Walt Disney (DIS) - Get Report and Macy's (M) - Get Report , industry leaders of the entertainment and retail worlds, respectively, took down Wall Street on Wednesday.
The S&P 500 ended 0.96% lower, snapping a three-day winning streak. The Dow Jones Industrial Average fell 1.2%, and the Nasdaq declined 1%.
Disney dropped 4% following a lackluster second quarter, its first earnings miss in five years. The world's largest entertainment company underperformed in its media-network and consumer products businesses. Expectations were high heading into the earnings report after the box office success of Star Wars: The Force Awakens and Zootopia.
"With puts/takes in the quarter, and a rare miss, we think Disney will be range-bound for a while," RBC Capital Markets wrote in a note. "We're aggressively sitting this fence with our Sector Perform rating, and would be more constructive on a re-acceleration in earnings growth or a step-up in cash deployment."
Macy's slid 15% after reporting its fifth straight quarterly same-store sales decline. Sales at stores open for at least a year fell 6.1% in the first quarter, nearly double the expected decline. The retailer also cut its full-year outlook, expecting a prolonged period of depressed sales.
Fashion accessories brand Fossil Group (FOSL) - Get Report tumbled 29% after issuing a far weaker second-quarter outlook than analysts expected. The company also missed estimates for its recent quarter as currency headwinds and weaker demand in its watches division cut into sales.
Macy's and Fossil led other retail stocks lower. Michael Kors (KORS) , Kate Spade (KATE) and Coach (COH) all dropped, the SPDR S&P Retail ETF (XRT) - Get Report fell 4.4%, and the Consumer Discretionary SPDR ETF (XLY) - Get Report slid 2%.
On the upside, an unexpected drop in crude inventories extended gains in oil prices. Crude moved higher after the Energy Information Administration reported a decline of 3.4 million barrels for U.S. inventories in the week ended May 6. Analysts had expected an increase of 300,000 barrels.
Canada's oil industry was beginning to recover from a massive wildfire that had curbed operations in the Alberta region. Royal Dutch Shell (RDS.A) has resumed production at its Albian site, while other oil sand companies near Fort McMurray are beginning to come back online. The ongoing blaze has caused erratic swings in the price of West Texas Intermediate.
Crude climbed 3.2% to $46.10 a barrel on Wednesday.
Staples (SPLS) and Office Depot (ODP) - Get Report were both under pressure on Wednesday morning after a federal judge blocked the planned $6.3 billion merger between the two office-stationery companies. The Federal Trade Commission said there was "reasonable probability that the proposed merger will substantially impair competition."
Staples shares slid 18%, while Office Depot plummeted 40%.
