Stocks fell for a second straight session on Wednesday. The Dow Jones Industrial Average (^DJI 0.06%) and the S&P 500 (^GSPC -0.22%) both lost about half a percentage point.
Today's stock market
| Index | Percentage Change | Point Change |
|---|---|---|
| Dow | (0.59%) | (138.19) |
| S&P 500 | (0.55%) | (14.25) |
Data source: Yahoo! Finance.
Energy stocks continued to slide on falling oil prices; the Energy Select Sector SPDR ETF (XLE -0.31%) dropped 1.1%. Retail stocks rose following an encouraging U.S. sales report for October, and the SPDR S&P Retail ETF (XRT 0.04%) added 0.2%.
As for individual stocks, Target Corporation (TGT 1.28%) reported a good quarter but left investors worried about holiday profits, and Chinese internet stock YY Inc. (YY 1.40%) skyrocketed on earnings growth.
Image source: Getty Images.
Target creates concern for the holiday season
Retail chain Target reported third-quarter results that beat Wall Street expectations, but gave a lukewarm forecast for the fourth quarter, and the stock plunged 9.8%. Sales increased 1.4% to $16.7 billion and adjusted earnings per share fell 17.1% to $0.91. Analysts were expecting earnings of $0.86 per share on revenue of $16.6 billion.
The closely watched metric of comparable sales rose 0.9% from the year before, resulting from a 1.4% increase in transactions and a 0.5% decrease in the average transaction amount. All of the gains in the comp figure came from online sales, though; comparable sales in brick-and-mortar stores were flat. Digital channel sales increased 24% and now account for 4.3% of the total.
The trigger for the stock price decline was a weak forecast for the holiday quarter. Company officials predicted adjusted EPS of $1.05 to $1.25 on comparable sales that will be flat to up 2%. Analysts had been expecting earnings of $1.24 on average, but Target is expecting a promotional season that will take a toll on profits.
Whereas results for the third quarter generally hit the bull's-eye and the company actually raised its guidance slightly for full-year EPS, analysts are closely scrutinizing retail company forecasts to try to get a bead on the 2017 holiday season. Disappointment in the short-term outlook apparently provoked a sell-off Target stock.
YY soars on growth of live streaming in China
Chinese social media company YY reported red-hot earnings growth in its latest quarter, and shares soared 24.8% to an all-time high. Revenue increased 48% to $465 million and non-GAAP diluted earnings per ADR rose 41% to $1.59. Wall Street was looking for revenue of $423 million and earnings of $1.45 per ADR.
YY runs a live-streaming service in China where users can create channels and communities around interests such as music, dating, games, and e-learning. Most of its revenue is earned from selling a virtual currency that users can use in games or to award to live video performers and hosts to show appreciation. Monthly active users increased nearly 37% to 73 million.
"Looking ahead, by leveraging our dual growth engines, YY Live and Huya, we will continue to invent new ways to attract users and stimulate user engagement, further build our content ecosystem, and explore more monetization opportunities," said Chairman and acting CEO David Xueling Li. "We believe that we have the right strategy in place to stay ahead of the competition in China's live streaming social media industry."
Chinese internet stocks may put off some U.S. investors who are wary of accounting scandals over the years and a lack of media coverage in the domestic financial press. That probably accounts for why YY is selling for a low 15 times analyst estimates of 2018 earnings, one of a few such stocks that can be had for cheap. But today, investors seemed more confident in YY, and willing to bid up the share price significantly.
