By Joyce Yu
Global equities extended losses as investors have been jittery about escalating tensions between the US and the North Korea since Tuesday. The S&P 500 index had its biggest one-day drop in almost three months on Thursday, but analysts said the decline may continue.
“We’re not very oversold yet so the market still has more downside left to it. What we’re seeing today is political tensions over North Korea and the United States … making people nervous,” said Robert Pavlik, chief market strategist at Boston Private Wealth in New York, to the Reuters.
“We’re still close to the all-time high so that makes people a little nervous too, so they might say now might be the time to take a little bit of money off the table,” he added.
Peter Kenny, senior market strategist at Global Markets Advisory Group in New York said, “I do think we could see markets pull back between 1 and 5 percent.”
The Dow Jones Industrial Average closed down 204.69 points, or 0.93 percent, at 21,844.01, the Nasdaq fell 2.13 percent while the S&P 500 lost 1.45 percent. The last time the S&P fell more than 1 percent was May 17. It is now on track for its biggest weekly drop since the week before the Nov. 8 U.S. presidential election.
Macy’s shares closed down 10.2 percent and Kohl’s fell almost 6 percent as the companies continued to report a drop in quarterly same-store sales. Macy’s has fallen more than 40% this year while Kohl’s has lost nearly 25%.
Shares of other retailers such as Nordstrom and J.C. Penney were also lower. Nordstrom said in its latest results after the closing bell that its e-commerce sales were up 20 percent year on year. J.C. Penney will release its earnings on Friday.
It’s yet another sign that the rise of Amazon and other e-commerce players have taken a toll on many traditional retailers. To attract customers, many retailers have resorted to big discounts and promotions which have in turn hurt their profits.
Retailers are having a difficult time to transit to e-commerce. Jeff Gennette, who was named Macy’s CEO earlier this year, stressed in the earnings release that Macy’s is continuing to invest in “accelerated growth in digital and mobile.” But he added “there is still work ahead of us.”
In addition to competition from e-commerce, discounters like Walmart and fast-fashion apparel brands such as H&M and Zara are taking away more market share. Retailers are challenged to provide better offerings of products consumers want at affordable prices.
The technology sector, which has been the leading S&P gainer so far this year, was the S&P’s biggest drag in yesterday’s fell.
Google’s diversity scandal took another twist on Thursday when CEO Sundar Pichai canceled a scheduled town hall meeting just moments before it was set to begin. The meeting was scheduled to address concerns over the on-going scandal but Pichai said that questions from employees had been leaked and that, in some cases, specific employees’ identities were revealed, exposing them to harassment and threats.