The Dow sank as much as 200 points Wednesday afternoon as Wall Street reels from an unexpected tumble in April retail sales.
Today’s Markets
As of 3:04 p.m. EDT, the Dow Jones Industrial Average lost 158.42 points, or 1.87%, to 8309.74, the S&P 500 sank 20.90 points, or 2.30%, to 887.45 and the Nasdaq Composite dropped 43.37 points, or 2.53%, to 1671.49. The consumer-friendly FOX 50 tumbled 11.96 points, or 1.79%, to 655.94.
The retail sales report, which showed sales sank for the second-straight month, spooked the markets and raised doubts about a potential second-half rebound for the struggling U.S. economy.
“I think there are some real concerns about the momentum of the economic recovery,” said Nick Kalivas, vice president of financial research at MF Global. “People were very quick to project a straight-line recovery and say the worst is over. But in the last couple of days the data isn’t keeping this idea of a recovery alive.”
The Dow has pared some of its losses but remains sharply lower. The tumble on the stock market comes as Wall Street’s nine-week hot streak is in jeopardy. While the markets ended mixed and well off their lows on Tuesday, the S&P 500 and Nasdaq Composite are on track to close lower for the third-straight day.
The Dow was led lower Wednesday by Alcoa (AA) and Bank of America (BAC). Just a handful of blue-chip stocks moved higher, including defensive names like Pfizer (PFE) and Merck (MRK). Also, General Motors (GM) rebounded after plummeting to 76-year lows Tuesday.
The Nasdaq Composite posted heavier losses as tech giants like eBay (EBAY) and BlackBerry maker Research in Motion (RIMM) tumbled despite positive comments about the second quarter from Intel (INTC) CEO Paul Otellini.
Even with this week's weak performance, the Dow is still up nearly 30% from its March low and the Nasdaq Composite could still notch its tenth-straight weekly rally. The markets have rallied around glimmers of hope that the 18-month recession will soon come to an end.
Traders were given a reason to sell on Wednesday as the Commerce Department said retail sales excluding autos tumbled 0.4% in April, significantly weaker than the 0.2% rise economists forecasted. Further, the government revised downward its retail sales figures for February and March.
The disappointing report raises doubts that the U.S. economy, which is reliant on the consumer behavior, will rebound in a timely fashion.Retail sales had been making moderate gains earlier this year, giving some traders hope that a bottom in the economy was nearing or had already passed.
"All the green thumb gardeners out there can count as many shoots as they want but the U.S. economy still comes down to the activities of the U.S. consumer and the consumer is still retrenching, paying down debt, saving and getting their credit lines cut," Peter Boockvar, equity analyst at Miller Tabak, wrote in a note.
Underscoring the weakness in the retail sector, department store giant Macy's (M), said its quarterly sales tumbled 9.5%. But Macy’s said it lost a better-than-expected 16 cents per share excluding items.
Separately, the Commerce Department said business inventories sank 1% in March, the seventh-straight monthly decline as businesses continue to adjust to slumping sales.
Financial stocks like Fifth Third Bancorp (FITB) took a big hit on Wednesday but the selling didn't appear to be triggered by any new developments. Banks have sold off in recent days amid a number of new plans to sell billions of dollars worth of stock, diluting shareholders in the process. At the same time, the financial sector has been on a big run, jumping 35% over the past 13 weeks.
In the commodity markets, crude oil failed to rally around a seemingly-bullish inventory report that showed crude stockpiles unexpectedly tumbled by nearly 5 million barrels last week. Crude, which settled at six-month highs on Tuesday, closed down 83 cents a barrel, or 1.41%, at $58.02
Corporate Movers
Intel (INTC) was hit by a $1.45 billion fine from the European Union for anti-competitive practices against rival chip maker Advanced Micro Devices (AMD).But the fine was offset by positive comments from CEO Paul Otellini, who told investors he sees better-than-expected orders and billing patterns.
Liz Claiborne (LIZ) posted a deeper-than-expected loss of 37 cents and said sales tumbled 29%. However, the retailer said it sees an improvement in the third quarter due to inventory and cost cuts and expects to turn an adjusted-profit in the fourth quarter.
IBM (IBM) CEO Sam Palmisano reiterated the tech giant's 2010 earnings target of $10 to $11 per share. He also said cost-cutting for the year is "mostly done" and that the company won't do "crazy deals."
Ford Motor (F) successfully sold 300 million shares at $4.75 a piece, a 5.2% discount to its closing price Tuesday. The auto maker plans to use the $1.4 billion to fund a retiree health program.
Bank of America (BAC) confirmed it raised $7.3 billion in capital from selling a stake in China Construction Bank.
Seagate Technology (STX) unveiled plans to slash 1,100 jobs, or 2.5% of its workforce. The computer disk-drive maker the moves will help it save $125 million annually.
World Markets
In London, the FTSE 100 was down 1.21% to 4371.85 while France's CAC 40 fell 1.36% to 3187.10 and Germany's DAX tumbled 1.89% to 4762.20.
In Asia, Japan's Nikkei 225 rallied 0.45% to 9340.49 while Hong Kong's Hang Seng fell 0.55% to 17059.62. China's Shanghai Composite rose 1.74% to 2663.77.
