NEW YORK >> A rout in retail stocks pulled U.S. indexes down on Wednesday.
Macy's, the largest U.S. department store chain, slashed its annual profit forecast after it reported a steep drop in earnings. Office Depot and Staples took big losses after a judge blocked their plans to merge.
Macy's had its biggest one-day loss since 2008, and its troubles dragged down department store, clothing, jewelry and accessories companies. Coming off their biggest gain in two months, stocks were lower all day, and most parts of the market slumped. Health care stocks took some of the biggest losses.
Utilities companies traded higher as bond prices rose and yields fell, and energy companies rose with oil prices. The price of oil climbed after the U.S. Department of Energy surprised investors by reporting that oil stockpiles shrank last week, and production also fell.
Retailers have a lot to worry about, said Kate Warne, investment strategist for Edward Jones. Competition within the industry is getting more intense as stores deal with more Internet-based competition and sell bigger ranges of products to keep shoppers from going elsewhere. Meanwhile, higher oil prices could push up the cost of gas and crimp consumer spending.
Spending habits have changed
"Consumers aren't spending the way they used to spend, especially on apparel, and they're not spending as much at the mall," Warne said.
The Dow Jones industrial average sank 217.23 points, or 1.2 percent, to 17,711.12. The Standard & Poor's 500 index fell 19.93 points, or 1 percent, to 2,064.46. The Nasdaq composite index lost 49.19 points, or 1 percent, to 4,760.69.
Macy's fell to its lowest price since December 2011 after it posted disappointing sales and said shoppers spent less on clothes and international tourists spent less. Macy's also sharply reduced its annual profit forecast. The stock sank $5.61, or 15.2 percent, to $31.38.
Retailers including Michael Kors, Nordstrom, Kohl's and Tiffany also took big losses. Watch and accessories maker Fossil Group also disclosed disappointing sales and said conditions have gotten worse. It cut its projections for the year, and its stock dropped $11.66, or 29.1 percent, to $28.44.
Office Depot and Staples plunged after calling off their proposed merger. A federal judge ruled that competition for office supplies would be reduced if the largest office-supply chain combined with the second-largest, supporting the government's effort to stop the $6.3 billion deal. Office Depot nosedived $2.46, or 40.4 percent, to $3.63 and reached its lowest price in three years. Staples skidded $1.90, or 18.3 percent, to $8.46.
Online rival Amazon, which is trading at all-time highs, rose $10.16, or 1.4 percent, to $713.23.
Already trading at its highest price in six months, benchmark U.S. crude rose again after the government reported a surprise decline of 3.4 million barrels.