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 Inc., which reported weaker-than-expected June sales due to cooler weather, joined Target Corp. and other retailers in an overall lackluster retail showing. Consumer spending is the biggest catalyst in the economy, and investors worried about the impact the lack of spending would have on corporate earnings.
Yahoo! Inc.’s earnings report, which disappointed investors due to a lower-than-expected outlook, helped drive tech stocks lower.
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 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. “Volume is very light, but that’s not a sign of complacency. It’s a sign that investors are paralyzed by all these background issues.”
At the close, the Dow Jones industrial average was down 68.73 points, or 0.7 percent, at 10,171.56. It was the fourth loss in the five trading sessions so far this month.
Broader stock indicators were also lower. The S&P 500 index was down 9.22 points, or 0.8 percent, at 1,109.10, and the tech-focused Nasdaq dropped 30.76 points, or 1.6 percent, to 1,935.32. Both indexes have also been down four of five trading days in July; the Nasdaq has lost more than 112 points while the S&P 500 has joined the Dow and Nasdaq in suffering a loss for the year.
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 Bryan Piskorowski, market analyst at 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.
“The market’s been somewhat oversold over the past few days, particularly in semiconductors and pharmaceuticals,” said Michael Sheldon, chief market strategist at Spencer Clarke LLC. “When you look at it, the economy’s still doing well, productivity is high and interest rates are still very accommodative. So there’s reason to be somewhat optimistic.”
Wal-Mart, the nation’s largest retailer, said its same-store sales — sales in individual stores open more than a year — climbed 2.2 percent in June, far from the 3.6 percent analysts had expected. Rival Target Corp.’s sales were similarly disappointing. Wal-Mart slipped 14 cents to $52.18, while Target fell 69 cents to $40.80.
J.C. Penney Co. Inc. gained $1.91 to $38.12 after the clothing retailer surpassed most other retailers and reported stronger June sales.
Investors hoping for a strong second-quarter earnings season were not cheered by the retail reports, especially after warnings and bearish outlooks in the technology sector. Yahoo! slid $2.52 to $30.08 one day after its earnings came out. While the current quarter was in line with Wall Street expectations, investors expected a better outlook for future quarters.
Dow component Alcoa Inc. fell 22 cents to $32.55 after reporting earnings late Wednesday that were a penny shy of analysts’ estimates.
Financial services company Cendant Corp. gave a positive earnings outlook, saying it would top its quarterly profit estimates by 2 to 3 cents per share. Cendant jumped 78 cents to $24.94.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.4 billion shares, compared with 1.32 billion on Wednesday.
Overseas, Japan’s Nikkei average fell 0.6 percent. In Europe, Britain’s FTSE 100 rose 0.5 percent, France’s CAC-40 rose 0.3 percent for the session and Germany’s DAX index gained 0.1 percent.