Wall Street was mixed in the afternoon session Friday, Aug. 18, as more drama unfolded in the White House's ranks.
The Dow Jones Industrial Average was down 0.11%, while the S&P 500 increased 0.04% and the Nasdaq gained 0.15%. The Dow and S&P 500 were still on track for a second weekly decline and the Nasdaq was likely to end with a fourth.
Donald Trump's presidency is under scrutiny again amid reports that chief strategist Steve Bannon is leaving. The New York Times reported that Trump insisted that Bannon resign and the adviser submitted his formal notice on Aug. 7. His departure was delayed by the violence at a right-wing rally in Charlottesville, VA, and its aftermath.
Markets have already grown pessimistic over crisis that have pulled attention away from Trump's tax-cutting agenda. First, there were increasingly aggressive exchanges between North Korea, which is developing a nuclear arsenal, and U.S., and later, rising racial tensions at home.
A white supremacist and neo-Nazi rally in Charlottesville on Saturday, Aug. 12, escalated into violence as protesters and counter-protesters clashed, culminating in an intentional hit-and-run that killed one and injured at least 19 others. James Alex Fields Jr. has been charged with second-degree murder in the death of 32-year-old Heather Heyer.
Trump caused outrage in his response to the tragedy, appearing reluctant to call out the white supremacists who gathered in Charlottesville and instead blaming violence on "both sides."
His moral equivalence earned him near-universal condemnation, including from many members of his own party and a number of prominent business leaders including Apple CEO Tim Cook. Resignations from his manufacturing council forced his hand in disbanding both that council and the Strategic and Policy forum on Wednesday afternoon.
"Growing political turmoil in Washington ... has raised serious doubts over [Trump's] ability to push through fiscal stimulus measures," said Fawad Razaqzada, market analyst at Forex.com.
Thursday's selloff "is in part the unwinding of the Trump rally that began after he won the Presidential election last year. We are still significantly above those levels, which means the potential for a deeper pullback in there."
Foot Locker Inc. (FL) lost roughly one-quarter of its value in its worst daily performance since November 2008 and its eighth worst day of all time. Industry peers such as Nike Inc. (NKE) , Finish Line Inc. (FINL) , and Buckle Inc. (BKE) also sold off.
Weaker-than-expected earnings and sales kicked off Foot Locker's slide. Second-quarter net income fell to 39 cents a share, much less than 94 cents a share a year earlier. Adjusted earnings of 62 cents a share came in below consensus of 90 cents. Revenue declined by 4.4% to $1.7 billion, below expectations of $1.8 billion. Same-store sales unexpectedly fell 6%, a surprise to analysts looking for a 0.8% gain.
CEO Richard Johnson said "sales of some recent top styles fell well short of our expectations" and that the company was "affected by the limited availability of innovative new products in the market." Johnson expects those trends to persist through the rest of the year. Full-year comparable store sales are expected to fall 3% to 4%.
Gap Inc. (GPS) moved lower Friday despite quarterly earnings more than double a year earlier. The casual clothing retailer earned 68 cents a share over its quarter ended July 29, far better than 31 cents a share a year earlier and higher than estimates of 52 cents.
Sales declined by 1.4% to $3.8 billion, but also exceeded estimates. Analysts anticipated $3.77 billion. The company's lower-priced Old Navy line, which has bolstered the stock in recent quarters, reported same-store sales increasing 5%. The Gap and Banana Republic brands' same-store sales fell 1% and 5%, respectively. It was an improvement on the same quarter a year earlier when Old Navy same-store sales came in flat, Gap fell 3%, and Banana Republic declined by 9%.
Estee Lauder Companies Inc. (EL) climbed around 7% Friday after a better-than-expected fiscal fourth quarter. The cosmetics company earned 61 cents a share, up from 25 cents a year earlier. Adjusted earnings of 5 cents came in higher than estimates of 43 cents. Sales of $2.89 billion exceeded consensus of $2.85 billion. First-quarter sales are expected to climb 9% to 10%. Current-quarter adjusted earnings guidance of 94 cents to 97 cents a share came in higher than a targeted 91 cents.
Deere & Co. (DE) declined after posting disappointing quarterly sales. Revenue increased by 16.6% to $7.81 billion, but fell short of a targeted $7.9 billion.
The agriculture equipment company earned $1.97 a share over the three months through July 30, higher than $1.55 a share a year earlier. Analysts anticipated $1.93 a share in profit. Deere predicted full-year agriculture and turf sales will increase by 9%, while construction and forestry revenue will climb by 15%. CEO Samuel Allen pointed to farm machinery sales in South America as a particular bright spot.
Around 92% of S&P 500 companies have reported earnings so far this season. Of those, 73.7% have exceeded earnings estimates, above the historical average of 64%, according to Thomson Reuters data. More than 68% have topped revenue consensus, also above an average of 59%.
The effect of the Friday's earnings reports was heightened by concerns over global terrorism after the attacks in Spain a day earlier.
Police shot dead five suspected terrorists in Cambrils, hours after a van slammed into a crowd in Barcelona.
The five people had attempted to drive a car into tourists on the Cambrils seafront, south of the city targeted in the earlier attack, but the vehicle overturned and the occupants instead accosted bystanders with knives, according to Reuters. Explosive belts found at the scene have been determined to be fake.
The Barcelona attack, on the the tourist-heavy Las Ramblas avenue, killed 13 people and injured more than 100 others. One women died from her injuries in Cambrils, bringing the total number of victims to 14. ISIS claimed credit for the incidents.
In European markets, Germany's DAX fell by 0.62%, the FTSE 100 in London declined 1.1%, and the CAC 40 in France slid 1%.
Consumer sentiment rose to its best level since January as recent stock market highs and a strong labor market fueled optimism. A preliminary reading on sentiment increased to 97.6 in August from 93.4. Economists expected the University of Michigan's measure to tick up to 94.
The weekly read on U.S. drilling activity from Baker Hughes will be released as normal at 1 p.m. ET.
Updated from 1:16 p.m. ET, Friday, Aug. 18.
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