US stocks were weighed down midsession on Wednesday by poor trading updates from Walt Disney (NYSE:DIS) and department store Macy's Inc. (NYSE:M) as well as the collapse of a proposed merger between Staples (NASDAQ:SPLS) and Office Depot (NASDAQ:ODP).
Even oil prices higher on the back of US Energy Information Administration data showing weekly inventories fell by 3.4mln barrels failed to do more than buttress a falling market. That's despite the West Texas Intermediate reading up 3% at $45.97 and just shy of the highest level at around $46.03 recorded in late April.
The broad-based S&P 500 was down 0.4% at 2,075, with Staples stock the biggest faller of 16% and Macys second down 13.6%. Meanwhile energy stocks performed well on the back of rising oil prices. Freeport-McMoRan (NYSE:FCX) was the second biggest riser of 9.1%, Chesapeake Energy (NYSE:CHK) was third with 7.9%, Marathon Oil fourth, up 5.6% and Devon Energy (NYSE:DVN) fifth, rising 5.1%. In fact, most of the top 15 risers on the S&P 500 were all energy companies.
The S&P Midcap 400 fared worse than the blue-chips, down 0.5% at 1,462, and led by Office Depot, down a whopping 38.8% at $3.73, while in the Nasdaq Staples was off 16.2%.
A few corporate update shockers and weak oil prices have led to US stocks, as expected, opening lower on Wednesday.
The collapse of the proposed merger between Staples Inc. (NASDAQ:SPLS) and Office Depot Inc (NASDAQ:ODP), plus disappointing trading updates from entertainment giant Walt Disney Co (NYSE:DIS) and department store leviathan Macy's Inc. (NYSE:M) caused a sea of red on traders' screens.
The blue-chip S&P 500 shed seven points in the first hour of trading to ebb to 2,077.
The mid-cap measure, the S&P 400, fared even worse, also falling seven points, to 1,463. Completing a trio of tumult, the small-cap gauge, the Russell 2,000 index, fell six points to 1,123.
Oil prices initially received a boost from news that oil giant Shell had announced the closure of a key Nigerian pipeline, adding to supply concerns in an industry where Canadian producers have seen output reduced by around 1mln barrels a day as a result of the Fort McMurray wildfire.
The gains evaporated before the release of inventories data from the US Energy Information Administration (EIA), only to return again after the EIA reported a 3.4mln barrel decline in stockpiles last week.
West Texas light, sweet crude for June delivery was trading 1.5% higher at $45.29 a barrel.
On Nasdaq, broadband services supplier Townstream Corp (NASDAQ:TWER) was comfortably the best performer, up 39%, after its net loss narrowed in the first quarter of 2016 to $6.99mln from $8.99mln the year before.
The audio technology company's loss per share of 26 cents was not as severe as the 29 cents a share expected by analysts.
After Tuesday's heavy gains, some banking of profits looks inevitable when the market opens, especially in view of the soft performance of European markets.
There is little in the way of economic data to entice investors to add to yesterday's gains, with the result that the S&P 500 is expected to relinquish around five points of yesterday's 26 point gain, while the Dow Jones average is tipped to give up 65 points or so of yesterday's 222 point rise.
Office Depot lost a third of its value in pre-market trade while Staples lost 15% after a judge blocked the proposed merger.
Walt Disney Co (NYSE:DIS) specializes in happy endings but the film studio and theme parks owner had better have a plot twist up its sleeve after fiscal second quarter results failed to wow the stock market.
Shares were off 5% ahead of the official start of trading after the company revealed below-par earnings after the bell yesterday, despite the success of films such as "Zootopia" in the first three months of 2016, plus the continued popularity of Christmas blockbuster “Star Wars: The Force Awakens”.
In contrast, computer games maker Electronic Arts Inc (NASDAQ:EA) beat the Street with its earnings numbers, prompting an 8.5% rise in the shares ahead of the official start of trading.