Weak retail sales put stocks in retreat
NEW YORK » Wall Street retreated sharply yesterday, slicing nearly 150 points off the Dow Jones industrials after weak sales at many of the nation's major retailers heightened concerns about consumer spending.
The day's economic news, which also included a disquieting trade deficit figure, appeared to give investors the rationale they were looking for to cash in some of the market's recent gains.
Analysts have been saying the surging stock market, which had pushed the Dow up more than 1,000 points since the beginning of March, was due for a pullback.
Companies including Wal-Mart Stores Inc., J.C. Penney Co. and Federated Department Stores Inc. said business fell in April, hurt by rising gasoline prices. Though many retail stocks had respectable gains yesterday, the reports raised worries that retail sales data from the U.S. Commerce Department today will also disappoint, and suggest that the economy is slower than previously thought.
Yesterday's sluggish retail sales and widening trade gap raised concerns that, while a rate cut may be necessary to boost the flagging economy, the central bank will be loathe to make one because of inflation.
"What the Federal Reserve said yesterday is that their principal focus is on inflation, and what retail sales said yesterday is that their focus should be on the economy," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "Things are not good out there in economy land."
The Dow Jones industrial average fell 147.74, or 1.11 percent, to 13,215.13, giving back five sessions' worth of gains. It was the biggest point drop in the Dow since a 242-point plunge on March 13.
Broader stock indicators also declined. The Standard & Poor's 500 index lost 21.11, or 1.40 percent, to 1,491.47, and the Nasdaq composite index dipped 42.60, or 1.65 percent, to 2,533.74.
The Russell 2000 index of smaller companies fell 16.14, or 1.93 percent, to 818.63, retreating from Wednesday's record close.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.54 billion shares, down from 1.56 billion Wednesday.
Crude oil prices rebounded yesterday from a decline a day earlier, rising 26 cents to $61.81 a barrel on the New York Mercantile Exchange.
Bonds rose after the weak economic data, with the yield on the benchmark 10-year Treasury note falling to 4.65 percent from 4.67 percent late Wednesday.
After reporting declines in April sales at stores open more than a year, Federated fell $1.72, or 3.9 percent, to $42.10; Wal-Mart fell 18 cents to $47.75; and J.C. Penney fell $1.41 to $76.80.
Not all the retail sales news was negative -- teen clothing retailer Aeropostale, for example, lifted its first-quarter outlook and its stock rose 6.9 percent -- but overall, the U.S. retail scene looked gloom- ier than anticipated.
Whole Foods Market Inc. said slowing sales growth and rising costs hurt first-quarter profits. The natural and organic foods retailer's results missed Wall Street's expectations. Whole Foods dropped $4.65, or 10 percent, to $41.15.