By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks on Thursday thudded lower for a second day, with the Dow industrials posting their first back-to-back triple-digit drop since June, as Treasury yields spiked to 2011 highs and Wal-Mart Stores Inc. and Cisco Systems Inc. cut their forecasts.
Several upbeat economic reports spurred thinking that the Federal Reserve will begin to scale back its monthly bond buys in September.
The Dow Jones Industrial Average (DJI) dropped 225.47 points, or 1.5%, to end at 15,112.19, with Cisco Systems Inc. (CSCO) pacing the drop, off 7.2%. Of the Dow's 30 components, 28 fell. Wal-Mart's shares were down 2.6%. (Read more on Wal-Mart http://www.marketwatch.com/story/wal-mart-cuts-year-view-as-sales-slow-in-2q-2013-08-15.)
The S&P 500 index (SPX) lost 24.07 points, or 1.4%, to 1,661.32, with all its 10 major sectors ending lower; among them, consumer discretionary and technology were slammed the hardest. The Nasdaq Composite (RIXF) declined 63.16 points, or 1.7%, to 3,606.12.
Around 721 million shares traded on the New York Stock Exchange. Composite volume surpassed 3.3 billion.
Ahead of Wall Street's open, Wal-Mart (WMT)reduced its outlooks for 2013 sales and profit, with the world's biggest retailer saying consumers are spending less. That warning came the morning after network-equipment maker Cisco Systems (CSCO)offered a less-than-expected revenue outlook.
"Cisco speaks to enterprise and service-provider spending, so that outlook is cloudy. And even more disappointing, if you look at almost two-thirds of the economy is driven by the consumer, and it looks like the consumer took the month of July off," said Art Hogan, a market strategist at Lazard Capital Markets, noting that Wal-Mart's results come a day after another retailer, Macy's Inc. (M), reported an unexpected drop in sales and cut its full-year profit targets.
The poor performance by retailers last month is also a concern heading into a seasonally important part of the year, as "we don't want it to extend into back-to-school and holiday spending," said Hogan.
But the market's steep fall should also be viewed in the context of the calendar, offered Hogan, who said: "It's August, and volumes are still dreadfully low. Low volume leads to high volatility."
Yields on fast track?
Thursday's economic reports including one showing an improving labor market helped cement the belief that the Federal Reserve would cut monetary stimulus soon.
"Judging by the reaction in bond yields, the overall reaction is positive for the economy and negative for Fed asset purchases," Dan Greenhaus, chief global strategist at BTIG LLC, wrote in emailed commentary. The 10-year Treasury yield (10_YEAR) was lately up 4 basis points at 2.763%.
"The continued reduction in the pace of firings to the slowest since the fall of 2007 should point the Fed further into the camp of taper sooner rather than later, and it's likely why the 10-year yield touched 2.80% immediately after versus 2.71% just yesterday and why the S&P futures are at the low of the morning," said Peter Boockvar, chief market analyst at the Lindsey Group.
Stocks fell and the yield on the 10-year Treasury note surged after economic reports had consumer prices climbing 0.2% in July and the number of Americans filing for new jobless benefits falling by 15,000 to 320,000 last week.
"The 10-year Treasury market has added 120 basis points to its yield since the tapering conversation began on May 22. Is it the notional amount of 2.8% that has us nervous? No, it's the fact that we added 120 basis points in 45 days. The world doesn't stop turning with 3% on the 10-year, it's the pace at which we got there," said Hogan.
The U.S. dollar(DXY) turned lower against the currencies of major U.S. trading partners, including the euro (EURUSD) and the yen (USDJPY)
Gold for December delivery (GCZ3) rose $27.50, or 2%, to $1,360.90 an ounce.
The price of oil climbed, with futures for September delivery (CLU3) up 48 cents, or 0.5%, at $107.33 a barrel.
In other economic news, the New York Fed's "Empire State" index fell to 8.2 in August from 9.5 in July, worse than expected. And the Federal Reserve reported industrial production held steady in July, while June's growth was revised lower.
The Philadelphia Federal Reserve's index of regional manufacturing activity fell in August after hitting a more-than two-year high in July.
Another report had home-builder confidence in August rising to a near eight-year high.
The Dow on Wednesday posted its first triple-digit drop since June as investors fretted over a recent spike in borrowing costs.
-Kate Gibson; 415-439-6400; AskNewswires@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
08-15-13 1630ETCopyright (c) 2013 Dow Jones & Company, Inc.
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