Stocks fall on worry about rise in prices
NEW YORK » Wall Street skidded lower today as investors grappled with concerns about the strength of consumer spending and the overall economy after downbeat comments from J.C. Penney Co. and Wells Fargo & Co.
"The J.C. Penney comments in terms of their guidance have sort of put another nail in retail. The assumption is the consumer has given up," said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh. "Three-dollar to $3.20 a gallon gas and house prices falling at 5 percent a year is really a double-whammy the consumer can't overcome."
Wells Fargo president and chief executive John Stumpf said the housing market is seeing its steepest decline since the Great Depression. Still, the company has been able to avoid big writedowns that other banks have faced because it has little exposure to some complex financial instruments such as mortgage-backed securities that have recently soured.
Investors also reacted to a Barron's report late yesterday that a General Electric Asset Management bond fund has suffered losses in mortgage-backed securities. The losses in the bond fund raised concerns that the squeeze on credit markets could spread and hurt small investors.
Barclays Group said its Barclays Capital investment unit became the latest financial institution to book a writedown on losses stemming from turbulent credit markets.
The Dow Jones industrial average fell 120.96, or 0.91 percent, to 13,110.05.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 19.43, or 1.32 percent, to 1,451.15. The Nasdaq composite index fell 25.81, or 0.98 percent, to 2,618.51.
The Russell 2000 index of smaller companies fell 10.87, or 1.39 percent, to 771.60.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.47 billion shares compared with 1.56 billion shares traded Wednesday.
Government bond prices rose. The yield on the 10-year Treasury note, which moves opposite its price, slid to 4.16 percent from 4.25 percent late Wednesday.
Oil prices slipped on the New York Mercantile Exchange, where a barrel of light, sweet crude fell 66 cents to settle at $93.43.
Gold prices fell as the dollar strengthened.
The U.S. Labor Department said yesterday its Consumer Price Index rose 0.3 percent in October on high energy and foods costs, in line with September's increase and analysts' forecast.
Investors were troubled by corporate news. J.C. Penney reported a 9 percent drop in fiscal third-quarter profit on weak sales and cut its fourth-quarter outlook, indicating that housing market problems are taking a toll on shoppers, as well. J.C. Penney fell $2.40, or 5.1 percent, to $44.33.
Wells Fargo fell $1.28, or 3.9 percent, to $31.97. Barclays Group fell 88 cents, or 2 percent, to $43 .
Ralcorp Holdings Inc., a maker of private-label cereals, said it will buy Kraft Food Inc.'s Post cereals division. Kraft fell 61 cents to $32.37, and Ralcorp rose $5.77, or 10.4 percent, to $61.24.