Stocks fell sharply on Thursday, with the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) both losing over 1%.

Today's stock market

Index Percentage Change Point Change
Dow (1.24%) (274.14)
S&P 500 (1.54%) (38.10)

Data source: Yahoo! Finance.

Bank stocks dropped on falling interest rates, and the SPDR S&P Regional Banking ETF (NYSEMKT:KRE) lost 2.8%. The price of gold rose, pushing up the SPDR Gold Shares ETF (NYSEMKT:GLD) by 0.5%.

As for individual stocks, L Brands, Inc. (NYSE:LB) fell on a negative outlook for the year and Alibaba Group Holding Limited (NYSE:BABA) rose on strong growth.

Falling stock chart superimposed digital map of world

Image source: Getty Images.

L Brands stirs up retail concerns

L Brands, parent company of Victoria's Secret, PINK, and Bath & Body Works, announced earnings that beat expectations but saw its shares fall 5.1% on a downward revision of its outlook for the full year.

Earnings per share came in at $0.48 for the second quarter, exceeding previous guidance of $0.40 to $0.45 and analyst expectations of $0.44. Revenue of $2.755 billion was just slightly above what analysts were expecting, but comparable-store sales were down 8%, a figure that was described as "below the company's expectations" in the press release. As a result, management lowered its forecast for full-year comparable-sales growth, excluding discontinued Victoria's Secret swim and apparel lines, from "up low-single digits" to "about flat." Full-year earnings per share guidance was revised downward to $3.00 to $3.20 from a previous range of $3.10 to $3.40. L Brands lowered its forecast for 2017 free cash flow from a midpoint of $800 million to $675 million, despite decreasing guidance for capital expenditures by $50 million.

The sales figures for the quarter came as no surprise to observers, as monthly sales numbers for the quarter had already been released, revealing a deterioration in performance and resulting in a pummeling of the stock price. But the lowered forecast for profits and cash flow for the rest of the year, despite a solid beat on the bottom line in Q2, had investors worrying about whether efforts to revitalize the Victoria's Secret brand are succeeding.

Alibaba accelerates

Chinese e-commerce giant Alibaba reported yet another stunning quarter, sending its shares higher by 2.8%. Revenue increased 56% in local currency to $7.4 billion and non-GAAP earnings per share were $1.17 compared with $0.74 in the year-ago quarter. Wall Street was expecting per-share earnings of $0.93 on revenue of $7.13 billion.

Alibaba's fiscal first-quarter results reflect an acceleration of its core commerce business as well as success in some of its most important growth initiatives. The "Amazon of China" saw year-over-year revenue growth in core commerce of 58%, compared with 47% in Q1. Revenue from cloud computing soared 96% as the number of paying customers increased 75%. International commerce rose 136%, demonstrating that Alibaba is having success with its push to sell products outside the borders of China, which is still in very early stages.

Alibaba's explosive growth and pattern of beating expectations most quarters has not gone unnoticed by investors, with the stock up 87% already this year. But given its dominance in what founder Jack Ma calls "new retail" in China and its early investments in cloud computing, streaming entertainment, and artificial intelligence, it's clear that any limits to the company's potential are not yet in sight.

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