The Dow Jones Industrial Average (^DJI +1.62%) is down 145 points as of 1:20 p.m. EDT after component stock Caterpillar (CAT +9.87%) and a number of other companies throughout the market reported disappointing earnings or forecasts. Meanwhile, the S&P 500 (^GSPC +1.02%) is down 13 points to 1,872.
It's a sea of red on the stock market today:
Source: Finviz.com.
The main culprit among Dow stocks is Caterpillar, down 2.9%. Caterpillar released its three-month rolling sales report last night after the market close. The report compares three-month rolling periods to the same time last year, and the results look worrisome:
Source: Caterpillar.
Total machine sales dropped 13% versus the year-ago period -- worse than March's 12% drop. Asia-Pacific total machine sales dropped 25% versus the year-ago period, declining still faster after March's 20% drop. Caterpillar is seen as a bellwether for the global economy, as it supplies the economically sensitive mining and construction industries. It's slowdown in sales is seen as a leading indicator of the economy and bodes ill for global growth.
Around the rest of the market there were also poor earnings reports, particularly in the retail sector. Staples missed analyst expectations and forecast a drop in sales for next quarter, and the stock has dropped 13% in response. Among consumer retail stocks, Urban Outfitters and TJX Companies are down 8% and 7%, respectively, after missing expectations. Dicks Sporting Goods is down 17% after missing expectations. Many companies have high expectations priced into them and are getting large haircuts when they miss. It's not all bad news, however.
Today's Dow leader
Today's Dow leader is Home Depot (HD +1.86%), up 2.3% after the company missed analyst expectations for earnings but projected that things will get better in the second quarter. Earnings per share rose to $1, beating analyst expectations of $0.99 -- but they missed if you don't include a $0.04 gain from its spinoff of Home Depot Supply. The company raised its forecast for earnings to $4.42 per share, in line with analyst expectations.
Revenue was up 3.1% to $19.7 billion, below analyst expectations of $20 billion. CFO Carol Tome highlighted the harsh winter that made U.S. economic growth slow in the first quarter, but on the earnings call, she added: "We believe that most of the sales lost to 'snow on the ground' in the first quarter will be realized in the second quarter. Further, May sales are robust, so today, we are affirming the sales guidance."
