U.S. Stocks Drop on Disney-Led Media Meltdown

By Austen Hufford And Saumya Vaishampayan 

        U.S. stocks were lower Thursday as investors fled from traditional media companies over cord-cutting fears and continued to wait for the government's employment report at the end of the week.
        The Dow Jones Industrial Average lost 117 points and the S&P 500 fell 17 points, or 0.8%.
        The selloff in traditional media companies began after Walt Disney Co. CEO Bob Iger said Tuesday there have been "some subscriber losses" at ESPN, raising fears that consumers are increasingly turning away from television and toward internet-based entertainment.
        "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."
        Disney was down 4.8% after falling 8.4% Wednesday. After both releasing second quarter earnings, Viacom was down 17% and 21st Century Fox Inc. fell 12%.
        Investors were also focused on the July jobs report, which will be released Friday morning. Interest has intensified as investors seek guidance on the path of interest rates in the U.S. The health of the labor market is a key factor in the Federal Reserve's interest-rate decision. 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.
        In particular, concerns about elevated stock valuations and the pace of earnings growth could weigh on the stock market once the Fed begins to move on rates, said David O'Malley, chief executive of Penn Mutual Asset Management, which oversees $20 billion. "These are issues that have been out there but haven't made it to the top of the heap," he said. "I'm not expecting a huge pullback, but you can take 5% to 7% off the market here."
        Initial jobless claims, a proxy for layoffs, rose by 3,000 to 270,000 in the week ended Aug. 1, the Labor Department said Thursday. Economists had forecast 271,000 new claims.
        Across the Atlantic, the Bank of England signaled it remains on course to start slowly lifting rates in the U.K. early next year. The U.K.'s FTSE 100 lost 0.1%, while the Stoxx Europe 600 lost 0.8%.
        Asian stocks were mixed. Chinese shares fell while Japanese stocks rose.
        In commodity markets, crude-oil futures continued to slide as they were down 1.8% to $44.33 a barrel.
        "The fact that oil is continuing to sell off, we are in a new spot. We haven't seen oil bear at these levels for an extended period of time for a number of years," said Gordon Charlop, managing director at Rosenblatt Securities. "The question becomes what is the implication."
        Despite the drop in oil, energy stocks were up 0.7%, though they are down 2.5% for the week.
        Gold futures gained 0.3% to $1089.10 an ounce.
        The yield on the 10-year Treasury note slipped to 2.225% from 2.270%. Yields fall as prices rise.
        Second-quarter earnings releases continue to hold investors' attention. Keurig Green Mountain Inc. shares slumped 30% after the company lowered its earnings outlook and reported weak sales. The company best known for its individually brewed coffee pods is preparing to launch a new countertop soda-drink machine.
        Michael Kors Holdings Ltd. results topped expectations even though profit fell for the second-straight quarter. Shares rose 11%.
        Tesla Motors Inc.'s second-quarter loss nearly tripled from a year earlier, reigniting concerns about the electric-car maker's ability to turn a profit. Shares fell 10%.
        Mondelez International Inc. shares rose 0.4% after activist investor William Ackman revealed a $5.5 billion stake in the company. The activist believes Mondelez has to grow revenues faster and cut costs significantly, or sell itself to a rival, The Wall Street Journal reported.
        Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com and to Austen Hufford at austen.hufford@wsj.com
        (END) Dow Jones Newswires

        August 06, 2015 12:05 ET (16:05 GMT)

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