COMMENTARY | COLUMNISTS | GEORGE CHAMBERLIN

Stocks decline as small caps slide, Wal-Mart results miss

Stock prices fell sharply again Thursday despite some encouraging economic reports.

The Dow Jones industrial average fell 167.16 points to 16,446.81. The Nasdaq composite index dropped 31.33 points to 4,069.29 and the S&P 500 stock index declined 17.68 points to 1,870.85.

The sell-off was prompted by news from Wal-Mart Stores Inc. (NYSE: WMT) showing sales in the first quarter of 2014 were impacted by the severe winter weather. The stock fell $1.91 to $76.83. Wal-Mart is a component of the Dow industrials.

The Department of Labor reported initial claims for jobless benefits fell 24,000 in the past week to 297,000, the lowest level since May 2007. It was also reported the consumer price index rose 0.3 percent in April on higher gasoline and beef prices.

Gold dropped $12.30 to $1,293.60 an ounce and oil fell 87 cents to $101.50 a barrel.

General Motors Co. (NYSE: GM) dropped 1.7 percent after recalling 2.7 million more vehicles. Cisco Systems Inc. (Nasdaq: CSCO) advanced 6 percent after a revenue forecast that beat analysts’ projections.

“The primary sentiment right now is cautious and nervous,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “It’s more a matter of capital preservation than it is trying to generate returns. This is a time of caution. More people are looking to make sales and raise cash than they are to put cash to work on the weakness.”

Economic data showed industrial production in the U.S. unexpectedly declined in April, held back by a plunge in utilities as temperatures warmed and a broad-based decrease in manufacturing. Manufacturing, which makes up 75 percent of total production, decreased 0.4 percent.

That contrasted with a higher-than-forecast reading on the Fed Bank of New York’s gauge of regional manufacturing, which climbed to 19.01 this month, from 1.29 in April.

“There’s not really any great news here,” said Randy Bateman, who oversees $3.5 billion as chief investment officer of Huntington Asset Advisors in Columbus, Ohio. “It’s just a slower growing period. Unless we see something that will really drive investor enthusiasm, it’ll be a trading-range market.”

David Tepper, founder of $20 billion hedge-fund firm Appaloosa Management LP, said he’s nervous about markets as the U.S. economy isn’t growing fast enough amid complacency by the Federal Reserve.

“The market is kind of dangerous in a way,” Tepper said Wednesday at the SkyBridge Alternatives Conference in Las Vegas. “I think it’s nervous time,” he said, adding that markets may “grind higher” in the near term.

Tepper, who started his Short Hills, N.J.-based firm in 1993, said he’s more worried about deflation than inflation and that this is the time to preserve money.

Wal-Mart sank 2.4 percent to $76.83. The world’s largest retailer forecast second-quarter profit that missed analysts’ estimates as the company copes with slow U.S. sales, especially at its Sam’s Club warehouse stores. First-quarter profit fell to $1.10 a share, with poor weather shaving off 3 cents a share. That trailed the $1.15-a-share estimate of analysts surveyed by Bloomberg.

Retailers in the S&P 500 fell 1.1 percent, with Kohl’s Corp. (NYSE: KSS) decreasing 3.4 percent to $52.21. The department-store operator reported sales and profit estimates that fell short of analysts’ forecasts. The stock fell the most since January.

Bristol-Myers Squibb Co. (NYSE: BMY) plummeted 6.1 percent to $48.93 for the biggest decline in the S&P 500. The drugmaker was downgraded to market “perform” from “outperform” by BMO Capital Markets after the company disclosed late Wednesday preliminary results of clinical testing on one of its cancer treatments.

Lincoln National (NYSE: LNC) dropped 5.2 percent to $47.41 for its biggest slide since 2012, pacing losses among insurers, which sank 1.4 percent as a group.

The yield on 10-year Treasury notes slid five basis points to 2.50 percent. Life insurers invest in bonds to back future obligations and generate profits. MetLife Inc. (NYSE: MET), the largest U.S. life insurer, sank 2.7 percent to $49.56.

General Motors dropped 1.7 percent to $34.36. The automaker announced that it is recalling an additional 2.7 million vehicles, including models with faulty brake lights that have led to hundreds of complaints, pushing the total to 11.1 million.

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