Aug. 15 - Stocks had their worst day since June as soggy outlooks from Wal-Mart and Cisco, rising bond yields, and worries about Federal Reserve stimulus proved too much for investors to deal with all at once. Conway G. Gittens reports.
Wall Street gets whacked on the head as the yield on the 10-year note spikes to a two-year high. Stocks endured their biggest sell-off since June without any place to hide in the market. Those rising rates could mean consumers will have even loss money to spend. Even more, higher rates may crimp demand for autos and housing - the two main pillars of this recovery. Homebuilders seem to be taking higher mortgage rates in stride - the National Association of Home Builders survey reaching close to a 9-year high. But investors aren't playing along. Look at a chart of this homebuilder ETF and you'll see it is down 10 percent from its recent high - which means housing stocks are in a correction. Adding to the stock market's breakdown: Wal-mart. Sales came in below forecasts and the world's largest retailer lowered its full-year sales and profit outlook. And Cisco will begin cutting 4,000 jobs in a matter of weeks as it faces uncertain demand for technology equipment. A quick after-the-bell footnote: even with slumping PC demand - Dell topped revenue and earnings expectations. More angst by way of speculation. Some say data suggest the economy is firm enough for the Federal Reserve to start slowing bond purchases. Weekly jobless claims dropped close to a six-year low... And consumer prices rose in July with shoppers paying more for just about everything - putting inflation on par with the Fed's discomfort level. On the flip side, growth in Mid-Atlantic business activity slowed significantly... And industrial production was flat last month. In European action, there were down arrows across the board.