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Warnings of slower sales sends US stocks lower

By Associated Press

LAST UPDATED: 07:28 a.m. HST, Aug 15, 2013

NEW YORK >> Warnings of weaker sales from two major companies and concern that the Federal Reserve could pull back its support for the economy sent the stock market spiraling lower Thursday.

Before the start of trading, Wal-Mart cut its estimates for annual revenue and profit, warning that cautious shoppers are spending less. The news followed a revenue forecast from Cisco Systems late Wednesday that was weaker than Wall Street expected.

The Standard & Poor's 500 index was down 20 points, or 1.2 percent, to 1,666 at noon Eastern Daylight Time.

The selling swept across all 10 industry groups in the index, and 93 percent of the index's 500 stocks fell.

The Dow Jones industrial average lost 177 points, or 1.2 percent, to 15,159. The Nasdaq composite index fell 52 points, or 1.4 percent, to 3,618.

"It seems like an overreaction today," said Randy Frederick, managing director of active trading and derivatives at the Schwab Center for Financial Research.

Frederick said many investors are speculating that the improving economy means the Fed will start pumping less money into the financial system in the coming months. If that results in lower bond prices and higher yields, it could lead more investors to dump dividend-paying stocks in favor of bonds.

"Some of the stocks getting hit hardest recently are big companies paying dividends," Frederick said. Utilities stocks are down 3 percent this week, for example, the worst of the S&P 500's industry groups.

The government said early Thursday that the number of Americans applying for unemployment benefits dropped to 320,000 last week. That's the lowest level since October 2007, two months before the start of the Great Recession.

Wal-Mart fell $1.50, or 2 percent, to $74.92, after the world's largest retailer cut its profit and revenue expectations for 2013. It reported second-quarter results that missed Wall Street's estimates.

Cisco Systems announced plans to cut 5 percent of its workforce, roughly 4,000 employees, as sales slow. CEO John Chambers called the global economy "challenging and inconsistent." Cisco plunged $1.88, or 7 percent, to $24.50.

Cisco's announcement weighed on other technology stocks, as it's widely regarded as a bellwether for the entire industry. That's because the company sells a wide range of products to corporations and governments and its fiscal quarters end a month later than most major technology companies, which gives investors an early look into current conditions.

Major stock indexes have slumped more than 1 percent for the week. The Dow is down 1.7 percent and the S&P 500 1.5 percent.

The stock market had been on a tear this year, reaching all time-highs on Aug. 2. The Dow is still up 16 percent in 2013; the S&P 500 up 17 percent.

In the market for U.S. government bonds, the yield on the 10-year note jumped to 2.79 percent, the highest level since July 2011.

Higher long-term interest rates hit real-estate stocks, because the yield on the 10-year U.S. government bond is a benchmark for interest rates on mortgage loans. A sharp increase in mortgage rates could cool demand for new houses and squelch a recovery in the housing market.

Equity Residential lost 1.21, or 2 percent, to 51.35, while Kimco Realty Corp. 51 cents or 2 percent to $21.22.

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mikethenovice wrote:
Buy on the dips when the strong companies stock price goes down. That's what the pros do. Just bought Cisco(CSCO).
on August 15,2013 | 05:02AM
tiki886 wrote:
Apparently you know something that the billionaires don't.

"One Investment Buffett Missed Out On" – And Why Billionaires Are Dumping Stocks at an Alarming Rate - http://www.warrenbuffett.com/why-billionaires-are-dumping-stocks-at-an-alarming-rate/


Warren Buffet, John Paulson, George Soros and many more are dumping stocks.

The simple answer is… they know.

They know that this market has been propped up by trillion dollar infusions from the Federal Reserve.

They know that Americans have lost 55% of their wealth since this crisis started.

They know nearly 25% of Americans are out of work (as opposed to the official 7.5% figures from the BLS) and that no meaningful jobs are being created.

They know that half of American households require government assistance, 100 million people are on welfare and nearly a quarter of them need nutritional assistance to put food on the table.

They know that the economic growth rates being disseminated to the people are completely bogus because they fail to account for the inflationary impact of the Fed’s monetary expansion.

They know this is wholly unsustainable, and they are getting out of Dodge before the next phase of this crisis takes hold and hammers the world yet again.

on August 15,2013 | 06:09AM
frontman wrote:
Thank You obamacare.........at least tell the truth.
on August 15,2013 | 05:35AM
tiki886 wrote:
Trillion dollar stimulous, QE 1,2,3...printing money at $85 billion per month, the bubble is about to burst and hyper inflation is right around the corner. I hope everyone has bought their 6 months supply of food. (and ammunition)
on August 15,2013 | 06:21AM
HD36 wrote:
The 10yr USTbond has gone up 100 basis points since May. The Fed is buying $85 billion a month in bonds to keep interesst rates low. So how come there going up? The Fed has lost control of interest rates. While they are buying, more people are selling. Getting out while they're still near the top. The historical norm on the 10yr is 7% so we're still more than 400 basis points away. The government payments on the interest on the debt will rise dramatically because the debt is near $17 trillion and the interest rates are rising fast. When the debt payment eclipses the military budget, and the world doesn't want to lend you anymore money, you got two choices: print more money to pay the debt or austerity and tax hikes. Both lead to civil unrest. The former leads to a rise in hard assets. I see Janet Yellen as the new Fed Cheif in January. More dovish than Bernacke, she'll extend QE and expand bond purchases. Wrong as usual, the currency will collapse, bonds go down even more, and everyone is going to realize: you can't solve a problem of too much debt and spending by more debt and spending.
on August 15,2013 | 06:26AM
tiki886 wrote:
Kenyan economic theory doesn't work. I meant Keynesian.
on August 15,2013 | 06:31AM
HD36 wrote:
The Emporer has no clothes.
on August 15,2013 | 07:22AM
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