U.S. Stocks Drop on Media MeltdownPosted: August 6, 2015
Fears of ‘cord-cutting’ jolt stocks of traditional media firms.
Austen Hufford And Saumya Vaishampayan report: Stocks slumped on Thursday in a selloff led by shares of media companies, which have reported a flurry of disappointing earnings amid concerns about the shift away from traditional television.
“Media stocks are getting slaughtered. It’s been the long-running fear that we would eventually see cord-cutting. Everyone thought it would be a slow-moving train wreck, but Disney’s comment woke people up.”
— Aaron Clark, a portfolio manager at GW&K Investment Management
A 15% decline in Viacom Inc. dragged down the Nasdaq Composite Index, which was 1.9% lower at 5044. Before the opening bell, the media giant reported a decline in second-quarter profit and revenue, fueling worries that more consumers are cutting the cable cord and turning to the Internet for their viewing.
That again weighed on the Dow Jones Industrial Average, which declined 154 points, or 0.9%, to 17386.77. The S&P 500 fell 1% to 2079.
Disney was down 4.8% on Thursday after falling 8.4% Wednesday. 21st Century Fox Inc. declined 11% after lowering its expectations for full-year profit for fiscal 2016.
“Media stocks are getting slaughtered,” said Aaron Clark, a portfolio manager at GW&K Investment Management, which manages $25 billion in assets. “It’s been the long-running fear that we would eventually see cord-cutting. Everyone thought it would be a slow-moving train wreck, but Disney’s comment woke people up.”
Thursday’s losses come against the backdrop of tepid growth in the U.S. and around the world. Many investors are also concerned that elevated valuations on some stocks aren’t supported by earnings growth.
As well, investors are skittish ahead of the July U.S. jobs report, due out Friday, as they try to gauge the path of interest rates in the U.S.
The health of the labor market is a key factor in the Federal Reserve’s decision when to raise rates. And since the central bank has held interest rates near zero since the financial crisis, fueling a rally in stocks, some investors are worried about how the market will adjust to slightly higher rates….(read more)
- U.S. stocks pare early losses to end flat (marketwatch.com)
- How the Dow Jones industrial average and other major indexes fared on Wednesday (canadianbusiness.com)
- Market Wrap: Markets Rebound on Easing China Fears; Consumer Confidence Slips in July; Twitter Outperforms in Q2 (streetinsider.com)
- U.S. stocks open lower after GDP report (marketwatch.com)