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Stocks Tumble After Wednesday’s Big Gains

U.S. Market
Stocks tumbled today, with the Dow shedding over 300 points, after yesterday’s big gains.

Initial unemployment claims fell by 1,000 to 287,000 last week, below the 292,000 claims expected by economists. The less volatile four-week moving average dropped 7,250 to 287.750, the lowest level since early 2006.

Wholesale inventories grew 0.7% in August compared to the previous month. Wholesale sales were down 0.7% in the month bringing the inventory-to-sales ratio to 1.19 from 1.17 in July.

At market close the Dow and Nasdaq were each down 2.0% while the S&P 500 was off 2.1%.

Stocks on the Move
Shares of PepsiCo (PEP) rose fell slightly after the firm reported third-quarter results. The Frito-Lay North America segment (20% of revenue and 33% of pre-corporate operating income in the quarter) posted another low-single-digit volume climb during the period and positive price and package mix helped to offset further volume weakness in North American carbonated beverages. Revenue in developing and emerging markets climbed 8%, building upon the same rate enjoyed in the prior quarter. Pepsi's profitability was a bit better than we anticipated for the quarter, leading the company to raise its full-year earnings per share growth target by 1 percentage point, to 9% excluding currency.

Gap (GPS) shares plunged over 12% after the firm posted disappointing results. Although progress appears to have been made at Banana Republic and Old Navy, with September comparable sales up 2% and 1%, respectively, the core Gap brand continues to struggle, with September's comparable sales declining 3%. Management has indicated that this weakness, in addition to more difficult expense comparisons, will likely weigh on third quarter margins. Additionally, the company announced that CEO Glenn Murphy will step down at the end of the fiscal year and will be replaced with Art Peck, now president of its growth, innovation, and digital division.