Stocks Slide as Rita Threatens
Selling intensified in the stock market Wednesday as Hurricane Rita threatened the Gulf of Mexico energy industry and the Texas coast.
The Dow Jones industrial average slumped for a third day, losing 103.49 points, or 1%, to 10,378.03. Trading was heavy.
Nervous investors snapped up government bonds and gold.
On Wall Street, the Dow’s decline brought its loss for the week to 2.5% and left the index at its lowest level since July 7, as investors showed increasing concern about the outlook for the economy and corporate earnings.
Those worries had intensified Tuesday, after the Federal Reserve voted to raise its key short-term interest rate for the 11th time since mid-2004 despite the risk that Rita could deal another blow to the economy.
The Fed chose to continue tightening credit to fight the inflation pressures stemming from the surge in energy prices this year, policymakers indicated in their post-meeting statement.
That isn’t sitting well with investors, who fear that the Fed’s latest rate move could further depress prospects for consumer and business spending.
“High oil, high energy are not good for the consumer, and it’s going to get worse as we enter the winter season,” said Todd Salamone, vice president of research at Schaeffer’s Investment Research in Cincinnati.
Retail stocks were among the shares hit hardest Wednesday, continuing a sell-off that began early in August. J.C. Penney lost $1.75 to $45.48, Kohl’s fell $1.68 to $48.22 and Guitar Center slid $2.33 to $53.88.
The selling went well beyond retail issues, however. Losers topped winners by 2 to 1 on the New York Stock Exchange and by nearly 3 to 1 on Nasdaq.
Many industrial and technology issues were weak as a mid-September survey of large-company chief executives by the Business Roundtable showed that just 40% expected to increase capital spending in the next six months. That was down from 54% in a survey the group took in August, before Hurricane Katrina struck the Gulf Coast.
As with the Dow, the tech-heavy Nasdaq composite index ended at its worst level since early July, dropping 24.69 points, or 1.2%, to 2,106.64.
The Standard & Poor’s 500 index gave up 11.14 points, or 0.9%, to 1,210.20, its lowest close since Aug. 30. The S&P; slipped back into the red year to date, off 0.1%, not counting dividend income.
Adding to the gloom, a number of companies have warned in recent days that near-term earnings won’t meet expectations because of weak sales, high energy costs or both.
Shares of cosmetics giant Avon Products slumped $3.60 to $27 on Wednesday after the company said late Tuesday that sales had been disappointing and that it anticipated more of a drag on results from energy prices.
Automated teller machine maker Diebold on Wednesday warned of a profit shortfall. Its shares dived $6.90 to $37.47.
New York Times led newspaper stocks lower after its downbeat profit forecast. The stock sank $2.13 to $30.
On the plus side, FedEx reported higher quarterly results. Its stock, which hit a 52-week low Tuesday, zoomed $6.15 to $83.15.
Amid growing concern about the economy, some investors bought Treasury securities, driving yields lower. The two-year T-note yield dropped to 3.93% from 3.98% on Tuesday. The 10-year T-note fell to 4.17% from 4.24%.
Gold also continued to benefit from economic and inflation jitters. Near-term gold futures in New York jumped $2.70 to a 17-year high of $468.90 an ounce. The price is up 7.2% year to date.
Among gold mining stocks, Newmont Mining surged $1.42 to $46.23 and Agnico Eagle rose 66 cents to $15.08.
Overseas, Japanese stocks continued to rally on optimism about an economic revival there. The Nikkei-225 index rose 0.4% to a four-year high of 13,196.57.
