Amazon.com and Wal-Mart Do a Rattled Dow no Favors

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Stocks closed out January with a whimper as the Dow Jones Industrial Average and S&P 500 finished with their worst month in nearly two years. By the time the market closed today, the blue chips were 5.3% lower than they were at the start of the year while the broad-market index was down 3.6%, primarily due to an emerging-market currency scare and the Fed's decision to continue with its bond-buying taper. For the day, the Dow fell 150 points, or 0.9%, while the S&P dropped 0.7%. American stocks were again rattled by emerging-market woes as the Russian ruble and Polish zloty both fell today, and investors seemed to overlook otherwise strong economic reports from home. The University of Michigan said consumer confidence had edged up to 81.2, slightly ahead of expectations, while Chicago PMI also beat projections, hitting 59.6, indicating a robust expansion of manufacturing activity in the Midwest this month.

Two retail giants also released underwhelming reports today, which likely affected the market's perception of the economy's direction.

First, Wal-Mart updated its guidance for the current fiscal year, saying it now expects its fourth-quarter EPS to come in at or slightly below the low end of its previously guided range of $1.60-$1.70, and consequently, for full-year EPS to be at or slightly below $5.11-$5.21. Considering the bloodbath experienced by many retailers during the holiday season, perhaps hitting the low end of guidance isn't such a defeat. Wal-Mart also said comps at U.S. namesake stores and Sam's Clubs would be slightly negative as the company blamed a reduction in the food-stamp program and bad weather for the poor results. Considering nearly 10% of all non-automotive consumer dollars are spent at Wal-Mart, the company is often seen as a bellwether for the economy as a whole. Shares traded down more than 1% this morning, but finished off just 0.1%.

Likewise, Amazon.com , the biggest threat to Wal-Mart, said holiday-season results were short of analyst expectations, falling 11% as a result. Sales grew 20%, to $25.6 billion, while the Street was expecting 22% growth to $26.1 billion, and earnings also missed, coming in at $0.51 against estimates of $0.66. Amazon notoriously downplays quarterly results, but with its tentacles reaching far into industries beyond traditional retail, the company's results also speak meaningfully about consumer spending habits and the economy's trajectory. If both Amazon and Wal-Mart are losing, it's no surprise to see the overall retail industry suffering. In an economy where 70% of GDP is based on consumer spending, those companies need to be succeeding for stocks to move up further.