Wall Street Slumps As Major Retailers Get Crushed

U.S. stocks fell on Friday after earnings reports from major retailers and depressed sales projections kept came in way below forecasted numbers. A decline in oil prices added additional pressure to consumer companies.

The poor retail earnings overshadowed upbeat April retail sales data as numbers released by the Commerce Department on Friday showed a 1.3 percent gain in retail spending by consumers in March, exceeding analyst expectations of a modest 0.8 percent gain. The news was positive enough to send some retailers’ stock back up on Friday.

One massive retailer that’s bucking the trend was Amazon (AMZN) which posted a 28 percent increase in sales in the first quarter.

According to Morgan Stanley, “Amazon is already the second largest U.S. apparel retailer (trailing only Walmart (WMT), as the company has grown to 7% of the overall U.S. apparel market. [Some analysts put the current number at 14 percent of the retail market.] We estimate Amazon will reach 19% share of the U.S. apparel market by 2020.”

Amazon Passes $700

After its strong earnings report, shares of Amazon soared past $700 per share last week to a new all-time high, pushing Amazon’s market value to $340.25 billion and at its annual shareholder meeting on April 30, Berkshire Hathaway’s (BRK-A) Chairman and CEO, Warren Buffett, said that he thinks Amazon’s full effect on the industry is “far from having been seen.”

Meanwhile, crude prices slipped as a stronger dollar weighed in and investors cashed in on gains from a three-day rally. The S&P energy index dropped 1.25 per cent. And although first quarter earnings reports were not as bad as expected, retail companies have already sounded warnings for June quarter earnings, leaving the S&P 500 (SPY) trading at about 16.5 times expected earnings.