Worries about U.S. consumers drag stocks lower


Amazon.com and Visa said the second half of the year was looking more troubled than expected. (Spencer Platt/Getty Images)
July 25

Investors got some bad news about the U.S. shopper Friday, driving down stocks and sending the Dow Jones industrial average to a loss for the week.

Two major U.S. companies — retail giant Amazon.com and credit card processor Visa — said the second half of the year was looking more troubled than originally expected. The cautious outlook from two companies so heavily exposed to consumer spending spooked investors, causing the stock market to fall at the open and remain lower throughout the day.

“Visa put a lot of caution into the market this morning,” said Quincy Krosby, a market strategist at Prudential Financial.

The Dow dropped 123.23 points, or 0.7 percent, to 16,960.57. It’s the first time the Dow has closed below the psychologically notable 17,000-point mark since July 9. The Standard & Poor’s 500-stock index fell 9.64 points, or 0.5 percent, to 1978.34, and the Nasdaq composite fell 22.55 points, or 0.5 percent, to 4449.56.

With Friday’s selling, the Dow fell 0.8 percent this week. The S&P 500 closed basically unchanged, and the Nasdaq rose 0.4 percent this week.

Visa was the biggest decliner among the blue chips, falling $7.97, or 3.6 percent, to $214.77. The credit card processor reported an 11 percent rise in quarterly profit but cut its full-year forecast on concerns about growth overseas.

Because the Dow is a price-weighted index, and Visa is the most expensive stock in the Dow, Visa was having an outsized impact on it. About 60 points of the Dow’s decline can be attributed to Visa.

Amazon’s quarterly results didn’t help boost investor sentiment, either.

Amazon’s stock slumped nearly 10 percent after the online retail giant late Thursday posted a much wider loss than analysts had forecast, hit by expenses. The Seattle-based company is focused on spending the money it makes to expand into new areas and products, including a smartphone, the Fire, which started selling Friday. Chief executive Jeffrey P. Bezos also owns The Washington Post.

Amazon fell $34.60 to close at $324.01, the biggest decliner in the S&P 500 index.

Investors retreated from riskier stocks and moved into traditional havens at times of uncertainty: bonds and gold. The yield on the 10-year Treasury note eased to 2.46 percent from 2.50 percent late Thursday as demand for the government bond rose. Gold climbed $12.60, or 1 percent, to $1,305.30 an ounce.

Despite the disappointing news from the consumer-focused companies, corporate earnings from the latest quarter have been solid. Of the 230 companies that have reported, 76 percent have beaten profit expectations and 67 percent have beaten sales expectations, according to FactSet.

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