Stocks Drop on More Uncertainty
Stocks took another nose dive Thursday when a drop in retail sales and reduced outlooks for financial companies prompted investors to again question the pace of the economic recovery. The Dow Jones industrial average had its second triple-digit loss in three days.
Selling accelerated in late afternoon after several attempts at a rebound failed.
“There is a lot of uncertainty out there. When you have uncertainty, the market drifts,” said Michael Murphy, head trader at Wachovia Securities.
The Dow closed down 114.91 points, or 1.2%, at 9,502.80. The drop erased all of the Dow’s 100.45-point advance Wednesday, when stocks rose in a late burst of buying driven by technical factors and a rumor--which proved unfounded--of pending positive earnings news from Microsoft.
The broader market also declined. The Nasdaq composite index fell 22.26 points, or 1.5%, to 1,496.86, offsetting the 21.94 points it gained Wednesday. The Standard & Poor’s 500 index stumbled 10.70 points, or 1.1%, to 1,009.56.
Losers led winners by a 5-to-3 margin on the New York Stock Exchange and by about 3 to 2 on Nasdaq. Trading was active.
A big pull on the market Thursday came from a 0.9% decline in retail sales for May. It was the largest drop in six months and was due to decreased spending on cars and clothes, the Commerce Department said.
Retail sales also were weaker than many analysts expected, and overshadowed a positive economic report from the Labor Department, which said wholesale prices fell 0.4% in May. Analysts were expecting the producer price index, which measures inflation pressures before they reach consumers, to rise by 0.1%.
Doubts about the economy, and concerns about a third year of decline on Wall Street, have been big factors in the market’s protracted slide. Stocks are headed for their fourth straight weekly decline, with the Dow having dropped 8% since May 17. Nasdaq has fallen 14% since then, while the S&P; has lost nearly 9%.
All three indexes also are inching closer to the three-year lows they hit in the first week of trading after the Sept. 11 terrorist attacks--8,235.81 for the Dow, 1,423.19 for Nasdaq and 965.80 for the S&P; 500. Falling through those levels would be a major blow to investors, analysts said.
“People are hesitant to make big bets,” Murphy said. “People say we will be lucky to end [the year] up 5%.”
Bond prices rallied on the economic reports, with the yield on the benchmark 10-year Treasury bond sliding from 4.96% on Wednesday to 4.90%--its lowest since the end of February.
Oil rose $1 a barrel to $25.64 as oil workers threatened to strike in Norway, a major non-OPEC producer.
In other market news Thursday:
* Retailing and auto stocks fell after Thursday’s retail sales report. Wal-Mart Stores slid $1.80 to $56.50, while DaimlerChrysler sank $1.71 to $45.69.
* Financial issues fell after Merrill Lynch reduced its yearly earnings estimates for the sector. Morgan Stanley fell $1.46 to $42.29, while Lehman Bros. stumbled $1.34 to $58.02. Merrill fell 6 cents to $38.70.
* Among gainers, ImClone regained 25 cents to close at $8.08, as a House panel held a hearing on allegations of insider trading. ImClone has lost 90% of its value since December due to the rejection of a leading drug prospect by the Food and Drug Administration. Former Chief Executive Samuel D. Waksal was arrested Wednesday on charges he used inside information to sell ImClone shares just before the FDA’s rejection.
* Doubts about the trustworthiness of corporate America’s accounting also were evident when Omnicom slumped 12% on questions about its accounting practices. Omnicom fell $7.66 to $54.62 even as Wall Street analysts defended its accounting methods.
Market Roundup, C6-7
