Dow Falls as Wal-Mart and Amazon Miss Expectations

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) was down 125 points, to 15,723, at 1:30 p.m. EST after two of the largest U.S. retailers missed earnings expectations. The S&P 500 (SNPINDEX: ^GSPC  ) was down nine points to 1,784.

Yesterday after the market close Amazon.com (NASDAQ: AMZN  ) reported quarterly earnings that missed analyst expectations; the stock is down nearly 10%. Amazon reported earnings per share of $0.51, above the $0.21 per share from a year ago but below analyst expectations of $0.74 per share. Revenue was up 20% to $25.59 billion, above last year's $21.27 billion but below analyst expectations of $26.5 billion. Amazon announced during the earnings conference call it is considering a $20-$40 hike to its Amazon Prime service, which offers free two-day shipping and video streaming. Amazon told analysts it expects earnings next quarter to range from a $200 million loss to a $200 million gain. Wall Street hates uncertainty and that's why we have the large sell-off today.

The other large retailer guiding lower today is Wal-Mart (NYSE: WMT  ) , which started the day down but is now up 0.2%. Wal-Mart had expected earnings per share in the just-ending fourth quarter between $1.60 and $1.70, but now expects earnings at $1.60 or possibly lower. The retailer said bad weather and cuts to the federal food stamps program hit its bottom line. The final quarterly report is due on Feb. 20.

What consumers and retailers are going through can be seen in today's economic releases.

Report

Period

Result

Previous

Personal Income

December

0%

0.2%

Consumer Spending

December

0.4%

0.6%

Personal Consumption Expenditures Inflation

December

1.1%

0.9%

Core PCE Inflation

December

1.2%

1.1%

Americans' personal income was flat in December, below analyst expectations of 0.1% growth. Consumer spending grew 0.4% in December, which was better than analyst expectations of 0.2% growth but less than November's 0.6% growth. Analysts had expected that with the slowdown in income growth that consumer spending would not have grown as fast. The biggest drag to income growth was expected to be the hit to lower-income consumers due to the end of some food stamps programs and a loss of federal long term unemployment benefits.

The other metric investors should note is the personal consumption expenditures inflation numbers. Core PCE inflation is the Federal Reserve's favored measure of inflation and has been running below the Federal Open Market Committee's target of 2%.

Foolish takeaway
So what can an investor do in times like this? It's hard to stay sober while everyone around you is drunk on Fed-stimulus punch, telling you to join in on the fun. My advice: keep learning, focus on your goals, have an investing plan, stick to it, and ignore the crowds.


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