eBay (NASDAQ: EBAY) capped the worst day for stocks since the 1987 stock market crash by confirming what investors already feared: that consumer spending is slowing sharply.
eBay posted better than expected earnings for the third quarter late Wednesday, while sales of $2.12 billion were up 12% from the year-ago quarter but just below estimates.
But the company’s fourth-quarter guidance — earnings per share of 39-41 cents and sales of $2.02-$2.17 billion — were well below analysts’ expectations.
But coming on top of a much steeper than expected drop in retail sales during the day, eBay’s outlook wasn’t completely unexpected. Its shares fell 5% in late trading, on top of a 13.6% drop during the day.
The 1.2% drop in retail sales in September — the third straight monthly drop — sent the Dow 7.9% lower, the Nasdaq down by 8.5%, and the S&P 9% lower, wiping out most of Monday’s big gains and putting the indexes back near five-year lows.
With consumer spending comprising two-thirds of the economy, the drop in consumer spending suggests that the economy may be unable to avoid recession, particularly with conditions worsening in October.
Amazon (NASDAQ: AMZN) also fell 13% during the day — and followed eBay after hours to a 5% loss.
Intel (NASDAQ: INTC) wasn’t much help, its stock lower by 6% on a murky outlook.
Dell (NASDAQ: DELL) and NetApp (NASDAQ: NTAP) fell on JP Morgan downgrades.
Linear Tech (NASDAQ: LLTC) lost 15% on its outlook.
The Nasdaq fell 150 to 1628, the S&P lost 90 to 907, and the Dow plunged 733 to 8577. Volume declined to 6.62 billion shares on the NYSE, and 2.61 billion on the Nasdaq. Decliners led by a 31-3 margin on the NYSE, and 24-4 on the Nasdaq. Downside volume was 97% on the NYSE, and 97% on the Nasdaq. New highs-new lows were 42-281 on the NYSE, and 3-228 on the Nasdaq.