Wall Street slid as US companies including Best Buy and Citigroup reported results that fell short of expectations, fuelling concern some valuations are not justified by the outlook.
In afternoon trading in New York today, the Dow Jones Industrial Average dropped 0.43 per cent, the Standard & Poor's 500 Index fell 0.24 per cent, while the Nasdaq Composite Index edged 0.04 per cent lower. Slides in shares of Wal-Mart, last down 1.1 per cent, and those of Chevron, last 0.3 per cent weaker, led declines in the Dow.
Shares of Best Buy got pummelled, last down 28 per cent, after the company reported a drop in US holiday sales and said fourth-quarter operating margins will be lower than last year.
"[O]ur holiday revenues were negatively impacted by a number of factors, including: the aggressive promotional activity in the retail industry during the holiday period, which we believe did not result in higher industry demand and had a deflationary impact on our revenue; supply constraints for key products; significant store traffic declines between "Power Week" and Christmas; and a disappointing mobile phone market," Best Buy President and CEO Hubert Joly said in a statement.
Other companies reporting earnings that missed the mark included Citigroup, pushing shares down 4.4 per cent.
First-time jobless claims dropped by 2,000 to 326,000 in the week ended Jan. 11, from a revised 328,000 in the previous week, according to Labor Department data. A separate Labor Department report showed the consumer price index rose 0.3 per cent in December.
"The outlook for 2014 remains good," Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York, told Reuters. "The economy is not generating much inflation at the moment, but this is no reason to doubt its vitality."
Other reports showed the Philadelphia Federal Reserve Bank's business activity index rose to 9.4 points in January, up from 6.4 in December, while the NAHB/Wells Fargo Housing Market Index slipped to 56 points in January, from a downwardly revised 57 in December.
"Following an unexpected jump last month, builder confidence has essentially levelled out and is holding at a solid level," NAHB Chairman Rick Judson, a home builder from Charlotte, North Carolina, said in a statement. "Many markets continue to improve and this bodes well for future home sales."
Optimism reigns for the global economic outlook in the year ahead. The world economy will grow 3.6 per cent this year compared with 2.9 per cent in 2013, according to a Reuters poll of about 300 economists.
In Europe, the Stoxx 600 Index finished the session 0.2 per cent down from the previous close, which was the highest level in six years. The UK's FTSE 100 slipped almost 0.1 per cent, Germany's DAX gave up 0.2 per cent, while France's CAC 40 fell 0.3 per cent.
A report showed that annual inflation in the euro zone was 0.8 per cent in December, compared with 0.9 per cent in November, while a separate report showed inflation in Germany was 1.2 per cent last month, compared with1.6 per cent the previous month.
The Turkish lira slid to a record low against the greenback, falling as much as 1 per cent 2.2124 per dollar, according to Bloomberg.
"We are seeing the most serious challenge for the government through their period of rule, over a decade now," Gokce Celik, analyst at Finansbank, told Reuters. "As the accusations draw closer to the inner circle [of the ruling AK Party] they arouse more concerns regarding political stability especially in the run-up to local elections in just over two months."