A sharp slide in oil prices wasn't enough to keep stocks aloft yesterday as March retail sales fell short of expectations and investors...
NEW YORK — A sharp slide in oil prices wasn’t enough to keep stocks aloft yesterday 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 in the face of glum corporate outlooks and anxiety about first-quarter results.
The Dow closed down 104.04, or 0.99 percent, at 10,403.93.
The broader gauges also fell. The Standard & Poor’s 500 index lost 13.97, or 1.18 percent, to 1,173.79. The Nasdaq composite index fell 31.03, or 1.55 percent, to 1,974.37.
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Microsoft, one of the 30 Dow stocks, lost 28 cents a share to close at $25.04. Boeing, also a Dow stock, rose 22 cents to $58.67.
Not only did the decline in fuel prices fail to lift stocks, the energy sector dropped 2.46 percent, making it one of the worst-performing segments of the market; the only sector to deliver a positive performance for the day was health care. This surprised some analysts, as it suggested a shift away from commodity-driven stocks, but few were alarmed by the pullback.
“The decline today reflected fear, really, of earnings announcements, and the weak retail sales. But the traditional ingredients for a bear market, I just don’t think, are in place yet,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “We’re looking at this as a bottoming process, money is moving out of the energy sector into other areas, particularly the long-lost health-care sector.”
Crude futures sagged after the International Energy Agency forecast slower growth in oil demand this year, and the U.S. Department of Energy reported a larger-than-expected build up 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 suggests investors may be skeptical about whether the declines will stick.
“I would’ve 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’re 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.”
Retail sales rose by a modest 0.3 percent 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 percent surge in sales.
The hints of a drop-off in consumer spending were exacerbated by a disappointing outlook from Harley-Davidson, which plunged 17 percent, or $9.84, to $48.93. The manufacturer’s earnings beat estimates by a penny a share, but it cut its shipment and profit forecasts for the year because of 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 percent; on the Dow, aluminum producer Alcoa lost 92 cents to $30.40.
Among gainers, McDonald’s rose 32 cents to $31.22 after saying it expects first-quarter profits to come in above Wall Street estimates thanks to customer initiatives and Easter.