Economic Worries Sink Stocks
Stocks resumed their decline Thursday as investors, concerned that slumping retail sales would further slow the economy, abandoned small-cap and technology shares.
The Nasdaq composite index extended its loss for the month to 112 points, while the Standard & Poor’s 500 index fell into negative territory for the year.
Wal-Mart Stores, which reported weaker-than-expected June sales that it attributed to cooler weather, joined Target and other retailers in an overall lackluster showing. Consumer spending is the economy’s biggest catalyst, and investors worried about how the lack of spending would affect corporate earnings.
Yahoo’s earnings report, released after the close of the market Wednesday, disappointed investors because of a lower-than- expected outlook and helped drive tech stocks lower. Yahoo, the first of the major Internet companies to report on the second quarter, slid $2.52 to $30.08.
The retail reports and disappointing earnings overshadowed good news about jobs. The number of first-time jobless claims fell to a three-year low and came in better than analysts expected. However, the creation of jobs still remains an issue after last week’s disappointing payroll report for June. The light volume in Thursday’s trading showed that many investors were keeping to the sidelines.
“You look at the retail report, job creation, interest rates, whatever, and it creates this drab, uninspiring backdrop for the market that makes it harder to commit any money right now,” said Jeff Kleintop, chief investment strategist for PNC Financial Services Group.
The Dow Jones industrial average fell 68.73 points, or 0.7%, to 10,171.56. It was the fourth loss in this month’s five sessions.
Broader stock indicators were also lower. The S&P; 500 index was down 9.22 points, or 0.8%, at 1,109.11, and the tech- focused Nasdaq dropped 30.76 points, or 1.6%, to 1,935.32. Both indexes have also been down four of five trading days in July; the S&P; 500 has joined the Dow and Nasdaq in taking a loss for the year.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange.
Still, some analysts were happy that despite the bad news -- which also included oil prices topping $40 a barrel and new warnings of terror threats in the United States -- the market’s losses weren’t greater.
“Considering all the bad news out on the tape today, things could be worse. You can’t really point to a lot of good news out there right now,” said analyst Bryan Piskorowski of Wachovia Securities. “It’s ugly, but it looks like the market’s trying to hold tight and wait for those second-quarter earnings results.”
An influx of bargain hunters kept the major indexes from further losses, with a handful of investors looking past the current uncertainty in favor of focusing on economic fundamentals, analysts said. And with the market’s recent losses, some stocks were attractively priced for those with a high tolerance for risk.
“When you look at it, the economy’s still doing well, productivity is high, and interest rates are still very accommodative,” said Michael Sheldon, chief market strategist at Spencer Clarke.
Among Thursday’s market highlights:
* The yield on the benchmark 10-year Treasury note fell to 4.47%, from 4.48% on Wednesday.
The sale of $10 billion in new 10-year inflation-protected notes went at a high yield of 2.02% and drew bids for 1.89 times the amount on offer, just below the 2.08 average of the five previous sales.
* Wal-Mart said its same-store sales -- sales in stores open at least a year -- climbed 2.2% in June, falling short of the 3.6% that analysts had expected. Target’s sales were similarly disappointing. Wal-Mart slipped 14 cents to $52.18, and Target fell 69 cents to $40.80.
Nordstrom lost $2.05 to $41.27 after the company said June same-store sales rose 5.7%; analysts had expected a gain of 6.3%. But J.C. Penney gained $1.91 to $38.12 after the clothing retailer surpassed the results of most other retailers and reported stronger June sales.
* Shares of home builders and casinos also slid on worries about consumer spending.
* Shares of drug makers rose after an aide to Senate Majority Leader Bill Frist (R-Tenn.) said it was unlikely that the Senate would vote before September on drug export legislation. The longer the Senate waits to vote on the bill, which Pfizer and its peers oppose, the less likely it is to pass. Pfizer rose 22 cents to $33.94, while Johnson & Johnson added 23 cents to $54.76.
