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Slide in retailers sends stocks broadly lower
Source: Agencies |
May 21, 2011, Saturday
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STOCKS closed broadly lower for a third straight week on signs that US consumer demand may be weakening.
Retailers Gap Inc. and Aeropostale each lost more than 14 percent yesterday after cutting their profit forecasts for the year, in part because of higher costs for raw materials and sluggish sales. That was a worrying sign for investors who had counted shoppers to lead a recovery in spending.
Gap's results pushed down other clothing companies who have been hit hard by the rising price of cotton and shoppers who are reluctant to splurge. Polo Ralph Lauren and JC. Penny Co. each dropped 4 percent, while Urban Outfitters fell 3 percent.
The Dow Jones industrial average fell 93.28 points, or 0.7 percent, to 12,512.04. The Standard & Poor's 500 index lost 10.33, or 0.8 percent, to 1,333.27. The Nasdaq composite dropped 19.99, or 0.7 percent, to 2,803.32. Each market index fell by more than 0.3 percent for the week. The Nasdaq lost the most, 0.9 percent.
One exception to the retailer gloom was Barnes & Noble Inc. The bookseller jumped 30 percent after announcing late Thursday that Liberty Media Corp. had offered to buy the company for US$1 billion in cash.
Stock indexes have been staying within a relatively small range since a May 4 plunge triggered by a sharp drop in oil prices. The Dow fell more than 200 points in two days. After several weeks of waffling, the index is trading slightly above where it was after that two-day fall.
May is traditionally a weak month for the stock market. Traders have little to base buying and selling decisions on with corporate earnings season officially over and economic news scarce. Trading has been relatively light.
A stronger US dollar has also hurt stocks. The dollar rose against the euro yesterday after the Fitch ratings agency downgraded Greece's debt three notches further into junk status, escalating worries about the European debt crisis.
In recent months, markets have fallen when the dollar rises against the euro because the stronger US currency has signaled that European countries are still struggling to get their debt under control.
"A stronger dollar and a stronger US market can coincide, but not when the US economic data are weak," said Quincy Krosby, chief market strategist for Prudential Financial. "This has been a stronger dollar that has come because of another currency weakening, not a stronger US economy."
Concerns about the strength of the economy pushed government bond prices higher as investors sought out safer assets. The yield on the benchmark 10-year Treasury note fell to 3.15 percent from 3.18 percent late Thursday. Bond yields fall when their prices rise.
There were a few notable exceptions to the downward trend. Software company Salesforece.com Inc. rose 8 percent, the most of any stock in the S&P 500, after its first-quarter profit beat expectations. Movie rental and streaming company Netflix gained 1.3 percent.
Two stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume came to 3.6 billion shares.
Retailers Gap Inc. and Aeropostale each lost more than 14 percent yesterday after cutting their profit forecasts for the year, in part because of higher costs for raw materials and sluggish sales. That was a worrying sign for investors who had counted shoppers to lead a recovery in spending.
Gap's results pushed down other clothing companies who have been hit hard by the rising price of cotton and shoppers who are reluctant to splurge. Polo Ralph Lauren and JC. Penny Co. each dropped 4 percent, while Urban Outfitters fell 3 percent.
The Dow Jones industrial average fell 93.28 points, or 0.7 percent, to 12,512.04. The Standard & Poor's 500 index lost 10.33, or 0.8 percent, to 1,333.27. The Nasdaq composite dropped 19.99, or 0.7 percent, to 2,803.32. Each market index fell by more than 0.3 percent for the week. The Nasdaq lost the most, 0.9 percent.
One exception to the retailer gloom was Barnes & Noble Inc. The bookseller jumped 30 percent after announcing late Thursday that Liberty Media Corp. had offered to buy the company for US$1 billion in cash.
Stock indexes have been staying within a relatively small range since a May 4 plunge triggered by a sharp drop in oil prices. The Dow fell more than 200 points in two days. After several weeks of waffling, the index is trading slightly above where it was after that two-day fall.
May is traditionally a weak month for the stock market. Traders have little to base buying and selling decisions on with corporate earnings season officially over and economic news scarce. Trading has been relatively light.
A stronger US dollar has also hurt stocks. The dollar rose against the euro yesterday after the Fitch ratings agency downgraded Greece's debt three notches further into junk status, escalating worries about the European debt crisis.
In recent months, markets have fallen when the dollar rises against the euro because the stronger US currency has signaled that European countries are still struggling to get their debt under control.
"A stronger dollar and a stronger US market can coincide, but not when the US economic data are weak," said Quincy Krosby, chief market strategist for Prudential Financial. "This has been a stronger dollar that has come because of another currency weakening, not a stronger US economy."
Concerns about the strength of the economy pushed government bond prices higher as investors sought out safer assets. The yield on the benchmark 10-year Treasury note fell to 3.15 percent from 3.18 percent late Thursday. Bond yields fall when their prices rise.
There were a few notable exceptions to the downward trend. Software company Salesforece.com Inc. rose 8 percent, the most of any stock in the S&P 500, after its first-quarter profit beat expectations. Movie rental and streaming company Netflix gained 1.3 percent.
Two stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume came to 3.6 billion shares.
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