U.S. equities closed lower on Thursday as retail stocks fell sharply on the back of Macy's weak quarterly results.
"When you look at retail and consumer spending, they reignite concerns about the consumer," said Phil Blancato, CEO of Ladenburg Thalmann Asset Management. "The U.S. economy is consumer-driven whether you like it or not."
The S&P 500 declined 0.2 percent with Macy's and Nordstrom dragging the index lower. The SPDR S&P Retail ETF (XRT) shed 2.7 percent as Macy's shares tanked by 17 percent.
The retailer posted adjusted earnings of 24 cents per share and revenue of $5.34 billion. Analysts polled by Reuters expected the firm to report earnings per share of 35 cents on sales of $5.47 billion.
"While there was a 4c negative impact from higher tax, it was still a miss, driven by a comp miss and weaker gross margins," Atlantic Equities analyst estimates Daniela Nedialkova, said in a note to clients Thursday. "FY17 guidance on both comp and EPS is reaffirmed, but with Q1 starting weaker, M has more to catch up on."
The retailer's stock has been under pressure all year. Entering Thursday's session, it was down 18.07 percent.
The Dow Jones industrial average fell around 25 points after briefly dropping more than 100 points, with Home Depot contributing the most losses. Helping the index cut losses were shares of Caterpillar, which rose 0.6 percent after Bank of America upgraded the stock to buy from neutral.
The Nasdaq composite pulled back about 0.2 percent.
Investors kept an eye on retailers Thursday as they braced for the release of April retail sales. Economists polled by Reuters expect an increase of 0.6 percent.
"The latest trend in retailing is not a surprise to investors this year," said Jack Ablin, chief investment officer at BMO Private Bank, in a Thursday note. "Consumers, increasingly comfortable with buying a wider selection of goods online, have opted for price and convenience of the Internet."
Social media company Snap also reported quarterly results, marking the first time doing so since going public. Snapchat's parent company reported sales of $150 million, with Reuters estimating a loss of 20 cents a share. The disappointing results sent the stock reeling 21.5 percent.
The major equity indexes had traded in a narrow range while holding near record levels recently. The S&P and Nasdaq posted all-time closing highs on Wednesday.
"The SPX has met resistance at its March high, a breakout above which would yield an impressive long-term measured move projection of approximately 2640," Katie Stockton, chief technical strategist at BTIG, said in a note to clients Thursday. "The consolidation phase is allowing the market to absorb short-term overbought conditions without a significant loss of momentum."
Wall Street has been eagerly waiting for the Trump administration to move forward with tax reform. Equities rallied sharply after President Donald Trump's election on hopes it would bring lower corporate taxes.
"There's a pervasive lack of selling," said Bruce Bittles, chief investment strategist at Baird. Nobody wants to pay the capital gains [taxes] if they think they're going to be lower later in the year."
"There isn't a lot of buying pressure either since valuations are so stretched," Bittles said.
In economic news, the producer price index rose 0.5 percent in April, more than the expected increase of 0.2 percent. Initial jobless claims, meanwhile, totaled 236,000, below the expected 245,000.
Treasury yields perked up after the data releases but quickly gave up their slight gains. The benchmark 10-year note yield slipped to 2.40 percent and the short-term two-year note yield traded near 1.343 percent.
The Dow Jones industrial average fell 23.69 points, or 0.11 percent, to 20,919.42, with Microsoft lagging and Apple outperforming.
The dropped 5.19 points, or 0.22 percent, to end at 2,394.44, with consumer discretionary leading eight sectors lower and consumer staples leading.
The Nasdaq 13.18 points, or 0.22 percent, to close at 6,115.96.
About nine stocks declined for every five advancers at the New York Stock Exchange, with an exchange volume of 862.75 million and a composite volume of 3.674 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 10.6.
On tap this week:
Earnings: Nordstrom, Teva Pharma
Earnings: Allianz, ArcelorMittal, JCPenney, Acushnet
8:30 a.m. Retail sales
8:30 a.m. CPI
9:00 a.m. Chicago Fed President Charles Evans
10:00 a.m. Consumer sentiment
10:00 a.m. Business inventories
12:30 p.m. Philadelphia Fed President Patrick Harker