Consumer spending disappoints traders
NEW YORK » Wall Street pulled back sharply yesterday as investors worried about fundamental economic problems as well as the ongoing fallout from credit market problems and stocks' own volatility. The Dow Jones industrials skidded more than 200 points.
The downturn in stocks was first triggered by a report from Wal-Mart Stores Inc. that profit will fall below expectations this year as consumers rein in spending. Home Depot Inc., the world's biggest home improvement chain, added to the slide when it said weakness in the housing market caused quarterly profit to slide.
Confirmation that Sentinel Management Group Inc., which oversees $1.6 billion in assets, is seeking to halt investor redemptions exacerbated the selling. Other funds are said to have similar problems as they face withdrawal demands at a time it has become difficult to value low-quality debt.
Hedge funds and other big institutional investors have taken a beating in recent weeks due to the market turbulence. On Monday, Goldman Sachs Group Inc. said three funds it manages have had significant losses -- and infused $3 billion in capital into one of them.
Wall Street has been pummeled as a deepening credit crunch spooked the market, and led to unease about potential losses at financial firms and funds.
The Dow fell 207.61, or 1.57 percent, to 13,028.92. The benchmark index is now on the verge of falling back below the psychologically-important 13,000 mark, which it first crossed in late April.
Broader stock indicators were lower. The Standard & Poor's 500 index shed 26.38, or 1.82 percent, to 1,426.54, and the Nasdaq composite index fell 43.12, or 1.70 percent, to 2,499.12.
The Russell 2000 index of smaller companies fell 16.94, or 2.17 percent, to 762.87.
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.73 percent from 4.78 percent late Monday. The fixed-income market has rallied as stock investors move into securities deemed less volatile.
Declining issues outpaced advancers by a 3 to 1 on the New York Stock Exchange, where consolidated volume came to 3.72 billion shares, up from 3.54 billion on Monday.
Light, sweet crude rose 76 cents to $72.38 on the New York Mercantile Exchange. The dollar was lower against other major currencies, while gold prices fell.
Goldman Sachs fell $7.75, or 4.4 percent, to $169.75 -- extending losses from Monday. Bear Stearns Cos., which earlier this summer disclosed that two of its funds were all but wiped out, fell $3.60, or 3.3 percent, to $106.
Retail stocks were also hit after Wal-Mart, one of the 30 stocks included in the Dow, lowered its profit forecast amid weak economic conditions that it blames for hurting consumer spending globally. The retailer said some of its customers were straining under economic pressures such as higher oil prices.
Wal-Mart shares tumbled $2.35, or 5.1 percent, to $43.82.
Home Depot warned that it expects profit to decline for fiscal 2007 because of a sluggish housing sector. Shares fell $1.72, or 4.9 percent, to $33.52.