The momentum that has stocks headed for a third straight weekly win stalled out Thursday as investors took in several economic reports and a handful of corporate earnings updates.
Kicking things off was data from the Labor Department that showed initial jobless claims jumped 13,000 last week to 231,000 – a three-month high.
"Jobless claims were a welcome addition to recent data that pointed to a slight cooling in the labor market and, perhaps, the U.S. economy," says Craig Erlam, senior market analyst at OANDA. "Of course, we're talking about a very small step in the right direction, from the perspective of the Fed, and it will need to be backed by a lot more over the coming months, but it's a start."
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Also on the economic calendar was data from the Federal Reserve, which showed industrial production fell by a wider-than-expected 0.6% in October. Manufacturing output was down 0.7%.
"Much of this decline was due to a 10% drop in the output of motor vehicles and parts that was affected by strikes at several major manufacturers of motor vehicles – the index for manufacturing excluding motor vehicles and parts edged up 0.1%," stated the report.
Factory struggles are likely to continue, says Priscilla Thiagamoorthy, senior economist at BMO Capital Markets, as recent Fed surveys underscore weak momentum. "Elevated borrowing costs are likely to undercut consumer demand and business investment, weighing on factory output," the economist adds.
Cisco sinks after earnings
As for today's earnings news, Cisco Systems (CSCO) plunged 9.8% after the company disclosed its fiscal first-quarter results. While the network equipment specialist beat on the top and bottom lines, it gave weaker-than-expected fiscal second-quarter guidance and lowered its full-year forecast.
"After three quarters of exceptionally strong product delivery, our customers are now focused on installing and implementing these unprecedented levels of products," said Chuck Robbins, CEO of Cisco, in the company's earnings call. "Simply put, customers are now taking time to onboard and deploy these heightened product deliveries," which is creating a slowdown in new orders.
Walmart stock sheds $37 billion in market value
Walmart (WMT) was another Dow Jones stock that plummeted after earnings. The discount retailer's third-quarter results were more than analysts were expecting, while customer transactions and the average ticket were both higher on a year-over-year basis. WMT also said global e-commerce sales surged 15%.
Nevertheless, Walmart stock fell 8.1% – erasing $37 billion in market value – following a cautious forecast. Specifically, Walmart is anticipating full-year earnings per share of $6.40 to $6.48 vs analysts' estimate for earnings of $6.48 per share. The company is also expecting revenue to grow between 5% to 5.5%, while analysts anticipate 5.1% top-line growth.
Weakness in these two blue chip stocks had the Dow Jones Industrial Average lagging its peers, with the 30-stock average closing down 0.1% at 34,945. The S&P 500 (+0.1% to 4,508) and the Nasdaq Composite (+0.07% at 14,113) finished the day with marginal gains.
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