MARKET SNAPSHOT: Dow, S&P 500 On The Verge Of Erasing All Of Tuesday's Rally

By Anora Mahmudova and Victor Reklaitis, MarketWatch

The SPDR S&P Retail ETF is seeing its worst drop since November

A selloff in U.S. stocks accelerated in late-trade Wednesday as disappointing earnings from Disney and a slump among retailers led to disquiet on Wall Street.

The downturn in sentiment threatened to wipe out sizable gains from Tuesday's advance, when the Dow Jones Industrial Average soared more than 200 points.

A slide in consumer-discretionary stocks, which include retail shares like Macy's and Nike weighed on the Dow and S&P 500, offsetting a 4% jump in oil prices.

The Dow sank 212 points, or 1.2%, to 17,715, led by Walt Disney Co.'s 4.3% selloff and a 3.7% drop in Nike Inc. (NKE). Nearly all of the blue-chip stocks were trading in negative territory. Only Microsoft Corp.(MSFT) was in the green, hanging on to modest 0.1% gain.

The S&P 500 dropped 18 points, or 0.9%, to 2,065, with nine of its 10 main sectors trading lower. Retailers like Staples Inc.(SPLS), Macy's Inc.(M), and Michael Kors Holdings Ltd. (KORS).

The SPDR S&P Retail ETF (XRT) is down 4.3%, representing its worst decline since Nov 2015.

Meanwhile, the Nasdaq Composite declined 47 points, or 1%, to 4,762.

"It's clear that sentiment was dented by disappointing earnings today, especially by Disney, which has never missed earnings," said Karyn Cavanaugh, market strategist at Voya Investment Management.

Cavanaugh sounded optimistic in her outlook for the rest of the year, however, despite the 7.5% decline in first-quarter profit growth.

"Earnings in the second quarter will also be negative but not as bad as in the first quarter and will improve in the second half of the year," she said. Cavanaugh said she expects the Federal Reserve, which has maintained an ultraloose monetary policy despite raising rates for the first time in December, to keep benchmark interest rates low.

Tuesday's rally for stock markets surprised some investors who still harbor concerns about corporate growth and economic sluggishness overseas.

"Yesterday's global equity journey was strangely optimistic when much of the economic data has been a little light in recent times," said David Buik, market commentator at Panmure Gordon & Co., in a note Wednesday. "As the threat of an increase in the Fed rate dissipates, investors girded up their loins buoyed by higher oil, better quality earnings and a feeling that perhaps markets had been oversold."

"It wasn't so much a euphoric session; it was just a question of sentiment improving," Buik added.

Other markets: On Wednesday, West Texas intermediate crude (http://www.marketwatch.com/story/crude-prices-fall-on-sticky-worries-about-oversupply-issues-2016-05-11) settled up 3.5%, at $46.23 a barrel after a drop in U.S. crude inventories and declines in domestic production. European stocks (http://www.marketwatch.com/story/european-shares-under-pressure-as-jcdecaux-oil-prices-pull-back-2016-05-11) ended mostly lower, while Asian markets (http://www.marketwatch.com/story/aussie-stocks-jump-as-oil-gains-but-other-asian-markets-mixed-2016-05-11) closed mixed. Gold futures gained, as the ICE U.S. Dollar Index pulled back.

Individual movers: Disney (DIS) was the biggest decliner within the Dow, after the entertainment giant late Tuesday posted weaker-than-expected quarterly results (http://www.marketwatch.com/story/disney-results-boosted-by-star-wars-zootopia-2016-05-10-164853110).

"Despite two blockbuster movies in 'Star Wars' and 'Zootopia,' Walt Disney failed to meet analysts' expectations," Buik said.

Read: Reactions to Disney's big miss--still "significant value" in movies (http://www.marketwatch.com/story/reactions-to-disneys-miss-investors-have-been-spoiled-still-significant-value-in-films-2016-05-11)

Staples Inc.(SPLS) was the biggest loser within the S&P 500, diving 18% following news that its planned buyout of rival Office Depot Inc.(ODP) ended unsuccessfully (http://www.marketwatch.com/story/staples-office-depot-merger-killed-by-antitrust-claims-again-2016-05-10).

Macy's Inc.(M) shares sank 10% after the retailer reported first-quarter sales that missed expectations (http://www.marketwatch.com/story/macys-shares-fall-in-premarket-after-sales-miss-expectations-outlook-lowered-2016-05-11) and issued a profit warning.

On the upside, Electronic Arts Inc.(EA) rose 14%, making it the best performing stock on the S&P 500. The maker of videogames late Tuesday reported better-than-expected quarterly results (http://www.marketwatch.com/story/ea-leans-on-star-wars-to-beat-consensus-2016-05-10).

(END) Dow Jones Newswires

May 11, 2016 15:58 ET (19:58 GMT)

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