Wall Street retreats as tobacco, consumer stocks tumble

Consumer stocks tumbled on Wall Street, pulling benchmarks lower as investors showed signs of fatigue after three straight days of gains.

In commodities, international oil prices hit their highest level in more than three years. The rally comes ahead of an Opec meeting in Saudi Arabia that is expected to renew a commitment to curb production levels.

US crude futures settled at $US68.20 a barrel, down 0.3% but Brent, the global benchmark, rose 0.3%, to $US73.68 after earlier trading above $74.

“It’s normally the case that the market moves ahead of the news, it’s pricing in a continued positive rhetoric from this meeting,” says Bjornar Tonhaugen, vice president of oil markets at consultancy Rystad Energy.

The weak performance of some of the world’s biggest consumer product companies sent their stocks into a tailspin in both the US and Europe.

Philip Morris'  stock plunged 15.6% – its worst one-day percentage decline in a decade and the lowest price since 2015 – as cigarette volumes dropped more than expected and new products experienced slower growth.

In London, British American Tobacco and Imperial Brands closed down 5.4% and 2.9%, respectively. Altria Group, which previously owned Philip Morris and is a partner on new non-tobacco smoking product in the US, was off 7.7%.

Disappointing sales
Household product makers were punished for Procter & Gamble’s disappointing sales results and signs the broader industry is struggling to raise prices.

“People believed these companies were solid. You take a Procter & Gamble or a Unilever and you think about them as cornerstones of your portfolio,” says Arian Vojdani, an investment strategist with MV Financial.

“Consumer staples don’t look as strong as people expected.” 

In a mixed trading session, stocks rose briefly then fell before recovering in the final hour. At the close, the Dow Jones Industrial Average had slipped 83.18 points, or 0.3%, to 24,664.89. The S&P 500 fell 0.6% to 2693.13 and the Nasdaq Composite dropped 0.8% to 7238.06.

Looking for explanations, investors believe Amazon.com’s push into selling more household goods and shoppers’ fading loyalty to name brands make it harder for those companies to build sales compared with technology stocks.

Procter & Gamble lost 3.3% after reporting weak sales growth in key markets, especially in its Gillette shaving business.

In Europe, Unilever and Nestlé both struggled to raise prices in the first quarter and saw some of their weakest sales growth in years. Unilever shares fell 2.2%, while Nestlé rose 0.2%.

Meanwhile, financial stocks on Wall Street rose as bond yields moved higher. The 10-year US Treasury note rose to 2.917% from 2.867% on Wednesday.

The Stoxx Europe 600 rose less than 0.1%. France’s CAC 40 rose 0.2%, as did the UK’s FTSE 100, while Germany’s DAX fell 0.2%.

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