Retailers sink as Amazon lifts its base pay; Dow sets record
NEW YORK» Retailers sank Tuesday after Amazon said it will raise hourly wages for its U.S. employees, and smaller companies continued to stumble. Several big industrial companies rose, pushing the Dow Jones industrial average to a record high.
Amazon — one of the largest private employers in the U.S. — said it will raise the minimum wage for its U.S. workers to $15 an hour in November. Amazon also said it will advocate for an increase in the federal minimum wage, which has been $7.25 an hour since July 2009. Its stock fell, but other retailers suffered bigger losses.
“The question is, do other companies have to follow suit?” said Quincy Krosby, chief market strategist at Prudential Financial. “This is the argument that what’s good for Main Street is not necessarily good for Wall Street.”
The bad news for retailers didn’t end there. Stitch Fix, an online clothing company, plunged 35.2 percent to $28.94. Stitch Fix had almost tripled since its IPO in November.
Pepsi fell after it said the strong dollar will take a bigger chunk out of its annual profit. General Motors and Ford both fell after they reported their sales.
The S&P 500 index fell 1.16 points to 2,923.43. The Dow added 122.73 points, or 0.5 percent, to 26,773.94. The biggest gains came from industrial companies Boeing, 3M and Caterpillar.
The Nasdaq composite lost 37.75 points, or 0.5 percent, to 7,999.55. Three stocks fell for every two that rose on the New York Stock Exchange.
Amazon lost 1.6 percent to $1,971.31, while Nike lost 2 percent to $82.77 and Gap sank 4.9 percent to $27.31. Smaller consumerfocused companies fared even worse. Crocs dropped 6.8 percent to $19.59 and Guess skidded 6.7 percent to $20.69.
The Russell 2000 index of smallercompany stocks fell 16.95 points, or 1 percent, to 1,656.04 — its lowest close since July 30. Earlier this year investors bought up smaller companies as tension with trading partners flared. Smaller companies tend to be less exposed to trade conflicts because they do more business in the U.S. than larger companies.
Investors aren’t as worried about trade tension recently, so they are shifting money out of smaller companies and into large multinationals. In the last three months, the S&P 500 has climbed 7.2 percent and the Russell is essentially flat.
Krosby said rising oil and gas prices are also a problem for retailers because they could leave consumers feeling like they have less money to spend over the holiday shopping season.
Automakers fell after their sales updates. GM dipped 2.6 percent to $33.30 and Ford fell 1.3 percent to $9.20, but Toyota added 0.7 percent to $125.71.
Pepsi fell 1.8 percent to $108.72 after it said the stronger dollar will have a bigger effect on its earnings this year. The company is now forecasting a profit of about $5.65 per share in 2018, down from an earlier estimate of $5.70 per share.
Airlines fell after Delta’s projections for the third quarter disappointed Wall Street, and the airline said it lost $30 million because of Hurricane Florence.