This Is the Reason the S&P 500 Swooned After a Big 2-Day Rally

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Considering that the broad-based S&P 500 (SNPINDEX: ^GSPC  ) tacked on a 4.3% cumulative gain in just the previous two sessions, we shouldn't be all that surprised that pessimists and profit takers were back in full control today. Also not helping matters were comments from some members of the Federal Reserve, located in the Minutes from its December policy meeting, that show hesitance about maintaining a policy of purchasing mortgage-backed securities and U.S. Treasuries throughout 2013. These members worry about the prudence of adding to an already fat Federal balance sheet with nearly $3 trillion in holdings.

That news, coupled with some modest profit taking, sent the S&P 500 lower by 3.05 points (-0.21%), to end at 1,459.37.

Weak retail sales reports seemed to be the primary reason that the S&P 500's two biggest losers – Family Dollar Stores (UNKNOWN: FDO.DL  ) and Limited Brands (NYSE: LB  ) -- were taken to the woodshed today.

Family Dollar was creamed, losing 13% on the day, after it reported worse-than-expected first-quarter results, and lowered its full-year outlook. Family Dollar attempted to branch out to carrying more everyday items during the quarter to drive traffic into its stores; unfortunately, this also put heavy pressure on the company's margins. For the year, Family Dollar is now expecting to report a profit of $3.90-$4.20, down from its own previous forecast of $4.10-$4.40, and Wall Street's projection, which called for $4.24 in annual EPS.

Limited, the owner of Victoria's Secret and Bath & Body Works, also found the going rough, falling nearly 6% after its December same-store sales figures missed the mark -- 3% versus expectations of 4.5%. I feel this could be a bit of an overreaction considering that Victoria's Secret's same-store sales grew by at least 7% for 30 straight months (even though this streak recently ended), and analysts seem to be placing unrealistic growth expectations on this nimble retailer.

Video game and accessories retailer GameStop (NYSE: GME  ) was bloodied to the tune of 5% for a different reason other than same-store sales figures. Sony (NYSE: SNE  ) filed for a patent application that would encode new games, and disallow them to be sold as used in the future. Although the move is being made to prevent retailers like GameStop from reselling games and stiffing the game developers on additional revenue from resold games, the move ultimately may hurt Sony more as it alienates gamers.

If you're looking for a winner in today's modest downdraft, look no further than discount apparel retailer Ross Stores (NASDAQ: ROST  ) , which rose 8%, after reporting a same-store sales rise of 6%, as compared to an expectation of just 3.6% from Wall Street. Ross has consistently provided consumers with brand-name merchandise at a steep discount to its peers, and its focus on value and inventory management continues to pay off.

Three Retail juggernauts
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in our special report. Uncovering these top picks is free today; just click here to read more.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2178231, ~/Articles/ArticleHandler.aspx, 9/27/2016 3:29:21 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,218.61 123.78 0.68%
S&P 500 2,158.93 12.83 0.60%
NASD 5,302.00 44.51 0.85%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
FDO.DL $0.00 Down +0.00 +0.00%
Family Dollar Stor… CAPS Rating: ***
GME $27.41 Down -0.23 -0.83%
GameStop CAPS Rating: **
LB $73.00 Down -0.33 -0.45%
L Brands CAPS Rating: ****
ROST $64.23 Up +0.47 +0.74%
Ross Stores CAPS Rating: ****
SNE $33.41 Down -0.06 -0.16%
Sony CAPS Rating: ***