Markets sell off as Wal-Mart predicts lower earnings

Dow dropped 157 (closing near the lows), decliners over advancers almost 3-2 & NAZ retreated 13.  The MLP index added 1+ to the 336s & the REIT index lost 2+ to the 315s.  Junk bond funds were mixed to higher & Treasuries rallied, taking the yield on the 10 year Treasury below 2%.  Oil fell back pennies & gold continued rising, nearing 1200.

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CLX15.NYM

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....46.54

...0.12

(0.3%)

The US economy grew modestly with little inflation pressure from mid-Aug to early Oct as a strong dollar weighed on manufacturing & tourism.  6 of the 12 Fed districts called the expansion “modest,” while 3 reported “moderate” growth, according to the Beige Book released by the Fed.  2 districts, Boston & Richmond, saw an increase in economic activity, while Kansas City declined.  The pace of growth in Richmond & Chicago slowed compared with the previous report.  Labor markets “tightened in most districts” even as wage growth remained subdued, with increases concentrated among highly skilled workers.  Price pressures were “contained” as some districts saw cheaper energy & commodities.  “Business contacts across the nation were generally optimistic about the near-term outlook,” the report stated.  Consumer spending “grew moderately,” housing & commercial real estate improved, & banking & finance “were generally positive,” the report stated.  Less favorable reports came from industries including manufacturing, which “turned in a mixed but generally weaker performance.”  Goods transportation also softened and the energy sector declined further.  Anecdotal evidence from the Beige Book will contribute to that debate at the next FOMC meeting on Oct 27-28.

Economy in U.S. Expanded Modestly Since Mid-August, Fed Says

Wal-Mart, a Dow stock & Dividend Aristocrat, suffered its worst stock decline in more than 15 years after predicting a drop in annual profit, underscoring the giant retailer’s struggles to reignite growth.  Earnings will decrease 6-12% in fiscal 2017, which ends in Jan of that year, the company said.  Analysts had estimated a gain of 4%.

Retailer sees fiscal 2017 earnings falling

WMT has been pumping money into its workforce & e-commerce capabilities in a bid to reignite stagnant sales growth, investments that will continue in fiscal 2017.  The company raised its base employee wages to $9 an hour in Apr & plans to boost hourly pay to at least $10 next year.  The effort, combined with an expanded training program, added about $1B in costs this year & $1½B next year.  The retail chain also said it authorized $20B in stock buybacks over a 2-year period (on top of a $15B repurchase program begun in 2013).  In addition, WMT is actively reviewing its portfolio for ways to streamline the business, CFO Officer Doug McMillon said.  It is trying to win back customers by improving the shopping experience, expanding its online grocery pickup service, & opening more small-format stores, called Neighborhood Markets.  It has also been spending $1B to improve its website & opening new distribution centers, aiming to speed the delivery of online orders.  WMT said net sales will grow 3-4% annually over the next 3 years, though they’ll be “relatively flat” in the current year.  "This is a growth company -- it just happens to be a really large growth company," McMillon said.  WMT also posted Q2 earnings that missed estimates.  EPS was $1.08, the company said in Aug.  Analysts had expected $1.12.  The stock slumped 6.70.  If you would like to learn more about WMT, click on this link:
club.ino.com/trend/analysis/stock/WMT?a_aid=CD3289&a_bid=6ae5b6f7

Wal-Mart Tumbles Most in 15 Years After Predicting Profit Slump

Wal-Mart (WMT)

Bank of America reported a quarterly profit, compared with a year-earlier loss due to a multi-billion dollar settlement with the US gov over mortgages.  The #2 US bank by assets said its non-interest expenses declined 31% to $13.8B in Q3.  "The key drivers of our business - deposit taking and lending to both our consumer and corporate clients - moved in the right direction ... and our trading results on behalf of clients remained fairly stable in challenging capital markets conditions," CEO Brian Moynihan said.  Non-interest income, which includes revenue from equity & bonds trading & mortgage banking, rose 1.6% to $11.1B.  The company, which has paid more than $70B in legal expenses since 2008, said its legal costs fell for the 3rd straight qtr, dropping to $231M from $6B a year earlier.  EPS was 37¢, attributable to shareholders for the qtr ended Sep 30.  In the year-earlier period, the bank had a loss of 4¢ per share, as it took a $5.6B charge related to the mortgage settlement.  Analysts had expected EPS of 33¢.  It was not immediately clear if the figures reported were comparable.  Total revenue on fully taxable equivalent basis fell 2.4% to $20.9B.  The stock was up 12¢ in a falling stock market.  If you would like to learn more about BAC, click on this link:
club.ino.com/trend/analysis/stock/BAC?a_aid=CD3289&a_bid=6ae5b6f7

Bank of America Posts Lower 3Q Profit

Bank of America (BAC)

The WMT forecast was chilling, casting a dark show over the stock market.  There are already enough dark clouds out there.  Europe is struggling to emerge from recessionary period, the Chinese economy continues to stumble & the MidEast is becoming more chaotic by the day.  Then there is oil, which made an attempt to go over 50 but was turned back this week.  The WMT warning was another reminder of why the stock market has not extended its long bull run in 2015.  In 11 days, the Dow rose 1100.  In the last 2 days it gave up 200+ of that gain & more selling lies ahead during earnings season.

Dow Jones Industrials