The overall stock market was down as big retailers missed earnings estimates and the Chinese devalued their currency the yuan again. The Dow Jones dropped another 193 points at the open to 17,209 and the S&P 500 slid 20 to 2,064, while the Nasdaq opened down 50.35 to 4,986.
In a repeat of yesterday’s news, the People’s Bank of China took the yuan down another 1.6 percent in value, causing gold to rise to 1,115, its highest level in three weeks and U.S. treasuries to rally. European stock markets fell as a result of the currency disruption.
Macy’s stock slid 4.8 percent to $64.24 after missing second-quarter earnings estimates when the department store chain reported its results Wednesday morning before the market opened. Earnings fell to $217 million or 64 cents a share, below the FactSet estimate of 76 cents a share. Sales came in at $6.1 billion, lower than the consensus of $6.22 billion. Chief executive officer Terry J. Lundgren said, “We are disappointed in our second-quarter results, which were impacted by a variety of factors, both internal to the company and in the macroeconomic environment.” That was code for the strong dollar hurt shopping tourists.
Macy’s also announced that it was forming a joint venture with Hong-Kong based Fung Retailing to set up online retailing in China. Macy’s plans to begin selling products in China later this year through an e-commerce presence on Alibaba’s Tmall Global.
Speaking of Alibaba, it too missed revenue estimates in the second quarter. The Chinese online retailer reported revenue of $3.27 billion, which was 28 percent higher than last year, but light of the estimate of $3.38 billion. That miss caused the stock to fall 7.3 percent in early trading to $71.51. Even though the year-over-year growth looks impressive, it’s actually the slowest pace of growth since the company went public last year. Alibaba also announced a share-buyback program of up to $4 billion over the next two years. Alibaba is also hoping to broaden its business beyond China.
Time is not money for Fossil, after the company announced flat watch sales in its second-quarter earnings after the market close on Tuesday. The stock plunged over 7 percent to $57.70, after the company admitted on the conference call that consumer’s preferences were changing and the watchmaker was in the process of making adjustments. Fossil is late to the idea of wearable technology and won’t have a product in that category until this fall. While jewelry and leather goods have performed well for the company, they are not the main products. Fossil was also hurt by the strong dollar and gave uninspiring guidance for the next quarter.
Looking ahead, retail sales reports will come out at 8:30 a.m. on Thursday morning. Also on Thursday, Coty, Nordstrom’s and Kohl’s will report earnings.