Downbeat Retail, Restaurant News Reverses Rally
Stocks pulled back Tuesday in the face of a profit warning from McDonald’s and more disappointing news about holiday retail sales.
In other trading, oil prices closed unchanged, holding above $30 a barrel.
On Wall Street, the market early in the day extended Monday’s rally, but selling took its toll as the session progressed.
The Dow Jones industrial average, which rose 193.69 points Monday, slid 92.01 points, or 1.1%, to 8,535.39.
The Nasdaq composite eased 8.28 points, or 0.6%, to 1,392.05 after gaining 37.91 points Monday.
Despite some good news in government economic reports, the McDonald’s warning and downbeat retail sales estimates gave investors more reason to be suspicious about the strength of the recovery, analysts said.
McDonald’s said tough competition would lead to its first quarterly loss. Its stock tumbled $1.39 to $15.99.
In the retail sector, Target dropped $2.05 to $29.75 after saying sales so far this month are “well below” expectations.
Some money managers believe that the market may tread water until the U.S-Iraq situation plays out.
“We won’t have a roaring bull market, certainly not until the Iraqi situation is resolved,” said Phil Ferguson, a strategist at AIM Capital Management Group in Houston. “When we know something like war is imminent, it makes investors cautious.”
Losers outnumbered winners by 20 to 13 on the New York Stock Exchange and by about the same margin on Nasdaq.
Stocks rallied sharply in late October and early November, but profit taking has knocked prices back in the last two weeks. Buyers returned Monday, powering a strong rally.
Rising energy prices have weighed on investor sentiment over the last week. On Tuesday, crude oil futures were unchanged in New York at $30.10 a barrel, on speculation that the intensifying civil conflict in Venezuela would continue to limit shipments from the fifth-largest exporter.
The opposition to Venezuelan President Hugo Chavez protested in Caracas after the army threatened to end a strike by oil workers. Marchers in the capital planned to shut down major highways and streets.
“Crude oil doesn’t want to give up its recent gains because of the strike in Venezuela,” said Ed Silliere, vice president of risk management at Energy Merchant in New York, which markets gasoline and heating oil. “The situation in Venezuela is still grim, and there’s no resolution in sight.”
Among Tuesday’s highlights:
* In the retail sector, Home Depot lost $1.01 to $25.70, Kohl’s fell $1.86 to $59.24, Wal-Mart dropped $1 to 50.94, and Zale slid 93 cents to $34.
Kmart sank 19 cents to 39 cents. The company said Monday that the NYSE will delist its shares as of Thursday. The stock then will trade in the over-the-counter Bulletin Board market.
* Many restaurant stocks declined along with McDonald’s. Cheesecake Factory fell $1.08 to $34.93, Wendy’s dropped 75 cents to $27.04, and Yum Brands eased 17 cents to $23.20.
* Drug stocks fell after GlaxoSmithKline faced a new delay in winning U.S. approval for its top-selling asthma drug. GlaxoSmithKline’s shares lost 89 cents to $36.91, Eli Lilly was off 89 cents to $63.96, and Bristol Myers lost 77 cents to $24.13.
But some biotech shares advanced. Amgen added $1.11 to $51.62, and Genentech rose 70 cents to $34.50.
* The tech sector showed relative strength. Apple Computer gained 23 cents to $15.08, and PeopleSoft edged up 42 cents to $18.46.
Market Roundup, C6-7
