Wall Street ended an erratic session Wednesday with a lopsided loss as blue chips fell on investors' concerns over the health of financial companies and high-tech stocks fared better on news from the semiconductor sector. The Dow Jones industrials fell more than 100 points, but the other major indexes finished with single-digit losses. ( AP )
The market was battling all the forces that have pummeled it in recent weeks: weak economic data, the price of oil and the credit crisis. Investors started the day disappointed by the government's retail sales report, and a jump in oil prices further dampened the mood; the financial sector was pulled lower by lingering uneasiness over the prospect of more credit-related losses at banks and brokerages.
The Commerce Department said retail sales slipped 0.1 percent as rising prices helped offset the effect of economic stimulus payments to US households. Excluding a big drop in sales of automobiles, retail sales rose 0.4 percent. But even on that basis it was the weakest showing in five months.
Wall Street had expected sales to remain flat after a minor increase in June. The report followed a warning from department store bellwether Macy's Inc. that its full-year profits would fall short of expectations because of slower sales.
The retail numbers pointed to a consumer who remains uneasy about spending. And because consumers' spending accounts for more than two-thirds of the economy, the fear on Wall Street is that the nation is in for a prolonged period of slow or even no growth.
The advance in oil prices also tinged investor sentiment, raising the prospect of higher inflation that will further cut into consumers' ability to spend . Light, sweet crude rose $2.99 to $116 a barrel on the New York Mercantile Exchange after the government said US crude supplies fell unexpectedly last week.
Although there were no major announcements related to financial companies' credit-related losses, the market was still smarting from reports earlier in the week that sent the Dow skidding nearly 140 points on Tuesday.
"We really didn't get any data that made us feel any better about the financials," said Kim Caughey, equity research analyst at Fort Pitt Capital Group.
Applied Materials Inc. did cheer the market somewhat, forecasting that orders would climb 5 percent to 10 percent in its fiscal fourth quarter. That helped lift other high-tech stocks.
The Dow fell 109.51, or 0.94 percent, to 11,532.96.
The Standard & Poor's 500 index slipped 3.76, or 0.29 percent, to 1,285.83, while the tech-focused Nasdaq composite index fell 1.99, or 0.08 percent, to 2,428.62.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.94 percent from 3.90 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.
Among financial stocks, Bank of America Corp. dropped $2.27, or 7.3 percent, to $28.86, while Morgan Stanley fell $2.35, or 5.5 percent, to $40.15.
Applied Materials Inc. rose 86 cents, or 4.7 percent, to $19.33 after the semiconductor equipment company also releasd second-quarter results that met Wall Street expectations.
Wall Street continued a streak of volatility that began weeks ago, with triple-digit moves in the Dow becoming commonplace. Investors had grown optimistic as the price of oil fell $35 since its mid-July high of $147.27, only to have that upbeat sentiment punctured by the latest bad news on the financial sector, the economy or both. And the fact that oil rose Wednesday was unsettling for investors who want to see crude extend its slide.
Moreover, the continuing reports of losses from banks and brokerages are underscoring the fact that the housing slump and resulting credit crisis are also nowhere near a resolution. Earlier this week, JPMorgan Chase & Co. said its third-quarter credit-related losses had already exceeded the $1.1 billion it reported in the second quarter.
Jim Smigiel, head of the investment strategy group at SEI, said Wall Street's erratic trading is likely to continue as investors seem to latch onto any scrap of news for insights into where the economy is headed.
"This is a very difficult market in terms of processing news and trying to guess what is positive and what is negative," he said. "The way through this is to try to look at everything a little bit further down the road and just buckle up, because it's going to be a pretty wild ride."
Investors scanned companies' quarterly reports hoping for insights into the economy.
Deere & Co. fell $2.25, or 3.2 percent, to close at $67.10 after reporting weaker-than-expected profits. The maker of farm and heavy equipment said its third-quarter earnings rose 7 percent as growth in the global agricultural market aided results. The company earned $575.2 million, or $1.32 a share, compared with $537.2 million, or $1.18 a share, a year earlier.
Analysts surveyed by Thomson Reuters, on average, predicted earnings of $1.36 per share.
Macy's inched up 39 cents to $20.66 after reporting second-quarter results. But other retail stocks fell; Target Corp. fell $1.29, or 2.61 percent, to $48.07, while Home Depot Inc. lost 96 cents, or 3.49 percent, to $26.52.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange. Consolidated volume came to 4.68 billion shares, up from Tuesday's 4.55 billion.
The Russell 2000 index of smaller companies rose 2.75, or 0.37 percent, to 747.69.
Overseas, Japan's Nikkei stock average fell 2.11 percent. Britain's FTSE 100 fell 1.55 percent, Germany's DAX index lost 2.49 percent, and France's CAC-40 fell 2.56 percent.