Wall Street sells off as consumers snap wallets shut

Business Materials 15 November 2008 07:27 (UTC +04:00)

U.S. stocks fell on Friday after a record drop in retail sales last month heightened fears that American consumers' reluctance to spend will push the economy into an even deeper downturn than currently expected, Reuters reportd.

An attempt at a rally in the last hour of trading fell apart, leaving the market unable to build on Thursday's dramatic rebound as more negative economic and corporate data painted a bleak picture.

It was another harrowing week for Wall Street, with sizable declines in four out of five sessions, even as world leaders headed to Washington to address the worst financial crisis in 80 years. For the week, the benchmark S& P 500 lost 6.16 percent.

Retail sales dropped 2.8 percent in October as consumers cut back amid recession fears, a government report showed. Consumer spending is a key driver for U.S. economic growth and corporate profits.

Adding to the grim mood, J.C. Penney, the department store operator, and Abercrombie & Fitch, a clothing retailer for teens and young adults, gave disappointing outlooks and said shoppers look like they will be reining in spending this holiday season.

The retail sales number "was abysmal, and guidance from retailers like J.C. Penney and Abercrombie was pretty bleak," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

"Without the participation from the retail sector, you're not going to be able to get much sustainability to any rally," he added.

The Dow Jones industrial average dropped 337.94 points, or 3.82 percent, to 8,497.31, while the Standard & Poor's 500 Index slid 38.00 points, or 4.17 percent, to 873.29. The Nasdaq Composite Index fell 79.85 points, or 5.00 percent, to end at 1,516.85.

For the week, the Dow lost 4.99 percent, while the Nasdaq skidded 7.92 percent.

The looming November 15 deadline for hedge fund redemption calls -- a key date for investors to pull their money out of hedge funds -- added to the selling, analysts said.

Dow component Boeing fell 4.9 percent to $41.04 after the aircraft maker and U.S. defense contractor delayed its latest version of its 747 jumbo jet by several months.

J.C. Penney and Abercrombie & Fitch shares slid after they forecast profit for the current quarter sharply lower than estimates.

J.C. Penney's stock fell 10.4 percent to $17.27, while Abercrombie sank 20.7 percent to $17.79, both on the NYSE. Their weak results echoed those a day earlier from mid-priced retailer Kohl's Corp and upscale chain Nordstrom Inc, which cut their full-year forecasts.

An index of retail shares dropped 7 percent, while

Dow component Wal-Mart declined 4 percent to $52.71.