US stocks down
A sharp slide in oil prices was not enough to keep US stocks aloft today as March retail sales fell short of expectations and investors grew apprehensive about weak consumer spending. The Dow Jones industrial average sank more than 100 points.
Investors shrugged off the steep drop in oil futures to focus on other concerns, including glum corporate outlooks and anxiety about first-quarter results.
Wall Street was also digesting the minutes of last month’s Federal Reserve meeting, trying to decide whether inflation would cause policy makers to become more aggressive with interest rate hikes.
Hints of a drop-off in consumer spending, exacerbated by a disappointing outlook from Harley-Davidson, added to the alarm.
“I would have expected the market to act a little bit better based on what crude is doing,” said Todd Clark, head of listed equity trading at Wells Fargo Securities.
”But with the retail numbers coming in lighter than expected, we are starting to have evidence that higher gas and fuel prices are starting to crimp the consumer, and I think the fear is that that won’t change any time soon.”
The Dow closed down 104.04, or 0.99%, at 10,403.93.
The broader gauges also fell. The Standard & Poor’s 500 index lost 13.97, or 1.18%, to close at 1,173.79. The Nasdaq composite index fell 31.03, or 1.55%, to 1,974.37.
Trading in the Treasury market was choppy, partly because of a poorly received five-year note sale. The 10-year note declined slightly, and its yield rose to 4.37%, up from 4.36% late yesterday.
The US dollar was mixed against other major currencies and gold prices rose.
Crude futures sagged after the International Energy Agency forecast slower growth in oil demand this year, and the US Department of Energy reported a larger-than-expected build in fuel supplies.
Light, sweet crude for May delivery shed $1.46 to $50.40 per barrel on the New York Mercantile Exchange. Analysts said the lack of a positive reaction in stocks suggested investors were sceptical about whether the declines would stick.
Retail sales rose by a modest 0.3% in March, according to the Commerce Department, the weakest showing since January, as the potential for an early Easter shopping rush was trumped by cold weather and higher fuel costs.
The increase was significantly below market expectations for a 0.8% surge in sales.
The hints of a drop-off in consumer spending were exacerbated by a disappointing outlook from Harley-Davidson, which plunged 17%, or $9.84, to $48.93.
The motorcycle manufacturer’s earnings beat estimates by a penny a share, but it cut its shipment and profit forecasts for the year due to weaker sales.
“This Harley thing was a big deal today. It’s suggestive of not-very-good returns, potentially, from a lot of consumer discretionaries.
"It’s a big reaction,” said Frank Husic, chief investment officer at Husic Capital Management in San Francisco. “I think it threw a real damper on things when that came out.”
The worst-performing sector was materials, which plunged 2.78%; on the Dow, aluminum producer Alcoa lost 92 cents to $30.40. Other steep decliners included Caterpillar, which shed $2.79 to $88.60, and troubled insurer American International Group, down $1.59 at $51.61.
Morgan Stanley was down $1.35 at $53.13 after the resignation of two top investment bankers, the latest development in a growing controversy over its lacklustre performance under chief executive Philip Purcell.
Joseph Perella, a star of investment banking for more than two decades, will leave his job as head of Morgan Stanley’s investment banking operations. Tarek “Terry” Abdel-Meguid, Perella’s top deputy, also left the company.
Among gainers, McDonald’s rose 32 cents to $31.22 after saying it expected first-quarter profits to come in above Wall Street estimates thanks to customer initiatives and a boost from the early Easter holiday.
The fast food leader said it expects earnings of 56 cents per share, well above the average analysts estimate for profits of 42 cents per share, according to Thomson Financial.
The Russell 2000 index, which tracks smaller company stocks, was down 10.49, or 1.71%, at 602.54.
Decliners outnumbered advancing issues by three to one on the New York Stock Exchange.
Volume totalled 1.63 billion shares, compared to 1.58 billion traded yesterday.
Elsewhere, Japan’s Nikkei stock average shed 0.28%. In Europe, France’s CAC-40 added 0.49%, the FTSE 100 rose 0.30% and Germany’s DAX index was up 0.77%.
