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Worries about US consumers drag stocks lower

By WTOP Staff

KEN SWEET
AP Markets Writer

NEW YORK (AP) — Investors got some bad news about the American shopper on Friday, driving down stocks and sending the Dow Jones industrial average to a loss for the week.

Two major U.S. companies — the retail giant Amazon and the credit card processor Visa — both said that the second half of the year was looking more troubled than originally expected. The cautious outlook from two companies so heavily exposed to consumer spending spooked investors, causing the stock market to fall at the open and remain lower throughout the day.

“Visa put a lot of caution into the market this morning,” said Quincy Krosby, a market strategist at Prudential Financial.

The Dow dropped 123.23 points, or 0.7 percent, to 16,960.57. It’s the first time the Dow has closed below the psychologically notable 17,000-point mark since July 9.

The Standard & Poor’s 500 fell 9.64 points, or 0.5 percent, to 1,978.34 and the Nasdaq composite fell 22.54 points, or 0.5 percent, to 4,449.56.

With Friday’s selling, the Dow fell 0.8 percent this week. The S&P 500 closed basically unchanged and the Nasdaq rose 0.4 percent this week.

Visa was the biggest decliner among the blue chips, falling $7.97, or 3.6 percent, to $214.77. The credit card processor reported an 11 percent rise in quarterly profit but cut its full-year forecast on concerns about growth overseas.

Because the Dow is a price-weighted index, and Visa is the most expensive stock in the Dow, Visa was having an outsized impact on it. Roughly 60 points of the Dow’s decline can be attributed to Visa.

Investors have closely watched Visa ever since the company went public in 2008. Credit cards that use Visa’s payment system are in nearly person’s pocket, and each time a consumer buys a product with a Visa card the company takes a small percentage.

To see Visa give a cautious outlook is worrisome, Krosby said.

“Visa represents the consumer and the consumer is one of the most important pieces for the future of this economic recovery,” she said.

Amazon’s quarterly results didn’t help boost investor sentiment either.

Amazon’s stock slumped 10 percent after the online retail giant late Thursday posted a much wider loss than analysts had forecast, hit by expenses. The Seattle-based company is focused on spending the money it makes to expand into new areas and products, including a smartphone, the Fire, which starts selling Friday.

Amazon fell $36.60 to close at $324.01, the biggest decliner in the S&P 500 index.

Investors retreated from riskier stocks and moved into traditional havens at times of uncertainty: bonds and gold. The yield on the 10-year Treasury note eased to 2.47 percent from 2.50 percent late Thursday as demand for the government bond rose. Gold climbed $12.50, or 1 percent, to $1,303.30 an ounce

Despite the disappointing news from those consumer-focused companies, corporate earnings from the latest quarter have been solid. Of the 230 companies that have reported so far, 76 percent have beaten profit expectations and 67 percent have beaten sales expectations, according to FactSet. So far the S&P 500 is averaging a 6.7 percent earnings growth this quarter compared to a year ago. Investors had expected earnings to be up 4.9 percent when the results started to roll in at the beginning of July.

Even with Friday’s declines, the stock market remains near all-time highs, and the S&P 500 closed at a record Thursday..

That made some investors cautious.

“I continue to see the level of complacency in the (stock) market to be unnerving,” Scott Clemons, chief investment strategist at Brown Brothers Harriman, which manages $25 billion in assets for private investors. “All of this geopolitical tension, the market trading near all-time highs, I think the market is at a critical state right now.”

Clemons said he doesn’t believe the market is poised for a major sell-off, but instead thinks investors should brace for more volatility and more heavy-handed reaction to disappointing earnings or data, like Friday’s Amazon and Visa results.

In other company news:

— Starbucks fell $1.71, or 2 percent, to $78.74, despite the company reporting a profit that came in above analysts’ expectations. The company also raised its full-year profit forecast.

— El Pollo Loco surged $9.03, or 60 percent, to $24.03 on its first day of trading in the public market. The grilled chicken restaurant chain priced its shares at $15 per share late Thursday.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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