Stocks fell broadly on Tuesday, Nov. 14, as investors turned their attention from corporate concerns to Capitol concerns. With earnings season nearing its end, markets continued to grapple with uncertainty over the fate of U.S. tax legislation.
While the three benchmark indexes pared some earlier losses, all closed lower. The Dow Jones Industrial Average slid 31 points, or 0.13%. The S&P 500 Index fell 6 points, or 0.23%, while the Nasdaq tipped lower by 20 points, or 0.29%.
The Dow Jones Industrial Average and S&P 500 snapped two-day losing streaks the day before, despite Dow component General Electric Co. (GE) posting its worst one-day performance since 2009 after announcing it would slash its dividend in half. GE continued losses on Tuesday, weighing on the blue-chip index. Of the Dow's 30 names, only about half finished Tuesday trading with gains.
GE was the Dow's worst performer, shedding 5.9% of its value to close at its lowest price since December 2011. DowDuPont Inc. (DWDP) was the second-worst performing Dow name, down 2.2%. Apple Inc. (AAPL) dropped 1.5%, the fourth consecutive decline and the third-worst performance on the index.
Republicans in the House assert they'll have enough votes to pass their version of tax reform this week. The Senate GOP plan, though, might face more of a struggle. That version would add $1.5 trillion to the federal deficit over 10 years and eliminate widely popular deductions such as state and local taxes.
Senate leaders also said Tuesday they are intent on repealing the individual mandate required under the Affordable Care Act, a move that would curb the plan's impact on the deficit.
President Donald Trump is expected to address lawmakers on the topic on Thursday, Nov. 16. Treasury Secretary Steven Mnuchin said at a Wall Street Journal CEO Council event that the White House will not accept any legislative compromise that puts the corporate tax rate any higher than 20%.
Overseas, economic data from China showed the country had firm gains in retail sales and industrial outputs, but figures missed economists' estimates and suggested slowing growth. According to the National Bureau of Statistics, China's retail sales last month increased 10% from the same time in 2016. Industrial output was 6.2% higher than a year earlier, but Wall Street had expected it would grow 6.3% in October.
The U.S. Producer Price Index for October increased 0.4%, topping expectations the figure would grow 0.1%.
Leading central bankers including Federal Reserve Chair Janet Yellen, European Central Bank President Mario Draghi, Bank of Japan Gov. Haruhiko Kuroda and Bank of England Gov. Mark Carney took part in a discussion on policy communications and guidance Tuesday. Yellen avoided near-term predictions, insisting that guidance from the Fed remains contingent on the overall economic outlook and reiterating that forecasts are not always set in stone.
"Market participants seek more than central banks are prepared to offer," Yellen said.
St. Louis Fed President James Bullard, meanwhile, said during a speech in Louisville, Ky., that there's no immediate need to hike interest rates because inflation levels will not return to the Fed's targets anytime soon.
"Inflation data during 2017 have surprised to the downside and call into question the idea that U.S. inflation is reliably returning toward target," a dovish Bullard said. "The current level of the policy rate is appropriate given current macroeconomic data."
Bullard's comments are not necessarily representative of the sentiment of his peers at the Fed. Most investors expect the central bank's Federal Open Market Committee will move to increase interest rates at its next meeting on Dec. 12 and Dec. 13.
In earnings news, Home Depot Inc. (HD) reported third-quarter profit of $1.84 a share early Tuesday, topping forecasts by 2 cents. Revenue of $25.03 billion also beat Wall Street estimates. The stock gained 1.65% Tuesday.
Advance Auto Parts Inc. (AAP) topped Wall Street's expectations with adjusted earnings of $1.43 a share in the third quarter. FactSet analysts forecast earnings of $1.21 for the Roanoke, Va.-based company.
Its same-store sales fell 3.4%, worse than an expected decline of 2.1%. Revenue also missed forecasts, totaling $2.18 billion for the quarter, compared with expectations of $2.21 billion.
Shares climbed 15.9% on Tuesday. Since the start of the year, Advance Auto has shed over 42% of its value.
Dick's Sporting Goods Inc. (DKS) beat third-quarter estimates, posting adjusted per share earnings of 30 cents and topping analysts' expectations of 26 cents. Revenue beat forecasts, too, totaling $1.94 billion compared with estimates of $1.89 billion for the three months ended Oct. 30. Same-store sales fell 0.9%, which was a narrower-than-expected decline. The company's rosy earnings beat was muted by its updated outlook: Dick's said 2018 earnings could fall as much as 20%. Shares dipped 2.74%.
TJX Cos. Inc. (TJX) posted diluted earnings per share of $1 for the quarter ended Oct. 28, which was in line with analyst expectations. The off-price retailer reported net sales of $8.8 billion, which increased 6% from the same period last year and were in line with Wall Street expectations. Comparable sales were flat.
The company said hurricanes had a negative impact during the quarter. Warmer weather also discouraged shoppers from stocking up on sweaters and jackets for cooler months, TJX said in a statement. Shares fell 4%.
West Texas Intermediate crude oil futures for December delivery dropped nearly 2% to $55.70 after the International Energy Agency said the oil price rally runs the risk of being short-lived and that global demand could weaken for the rest of this year and into next year.
Private-equity firm Roark Capital Group reportedly has made a $2.3 billion bid for casual dining chain Buffalo Wild Wings Inc. (BWLD) . The bid came just months after CEO Sally Smith announced she would retire by year-end amid pressure from activist investors.
Shares of Buffalo Wild Wings soared 24% to $146.35 Tuesday, following a report about the bid from The Wall Street Journal late Monday.
Roark has a history of acquiring struggling casual dining chains and turning them around, as was the case with Arby's, which it bought in 2011, and Auntie Anne's Inc., which it purchased in 2010.
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But some industry sources said Buffalo Wild Wings is strong enough to fend for itself, especially as investors were already optimistic about the prospects for a new CEO. The Minneapolis-based chain beat Wall Street expectations last month with its third-quarter earnings report.
"We don't believe the Buffalo Wild Wings brand is dead. It still has good mindshare with consumers," said Jeremy Hamblin, a senior analyst at Dougherty & Co. "You can argue that most restaurant operators have struggled in recent years because of higher labor costs and lower traffic trends in casual dining."
Anheuser-Busch Inbev SA (BUD) shares extended declines Tuesday after the world's biggest brewer shuffled its North America leadership team amid questions over the sustained weakness of its domestic beer sales.
AB InBev tapped Michel Doukeris to head its North America division and replace João Castro Neves in a bid to stem falling U.S. sales, where its Bud Light brand holds a 19% market share but is facing persistent challenges from microbrewers and changing consumer habits.
In October, the company reported a 6.1% decline in total volume in the third quarter and Budweiser revenue dropped by 2.2%. Sales in the U.S. have been under pressure from craft beers, with the company's market share in the U.S. falling to 44.1% in 2016 from 50.6% in 2008, according to research firm Euromonitor International.
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