Stocks Fall After Sales Report, Bernanke Speech
Stocks Fall After Sales Report, Bernanke Speech
NEW YORK — Wall Street pulled back Tuesday after a report on retail sales and comments from Federal Reserve Chairman Ben Bernanke gave investors little incentive to extend the previous session’s big advance.
Investors remained concerned that higher energy and food prices will curb consumer spending, which makes up more than two-thirds of the U.S. economy. The latest report from the Commerce Department showed that retail sales fell in April, increasing worries about a recession.
The report, which was in line with economists’ expectations, did show better-than-expected sales if automobiles are excluded. However, that still indicates Americans are reluctant to make big-ticket purchases - especially as soaring gasoline prices cut into demand.
Meanwhile, Bernanke said during a speech at a Fed conference in Atlanta that turmoil in financial markets has eased somewhat, but the situation is still “far from normal.” He noted some improvements in the markets for certain mortgage-backed securities, such as those backed by Fannie Mae and Freddie Mac, as well as some fixed-rate mortgages and corporate debt.
Though the data and Bernanke’s comments were interpreted as being largely positive for the market, analysts said it still wasn’t enough to ease concerns about the overall economy. Brian Gendreau, investment strategist for ING Investment Management, believes investors won’t really get a clear picture until more economic data is released in June and July.
“We’re going to go through a period where the markets are going to focus on the macro-data, and any adverse piece of news about the credit markets,” he said. “It will be a trendless market until the uncertainties about a contraction in economic activity are resolved.”
In late morning trading, the Dow Jones industrial average fell 67.09, or 0.52 percent, to 12,809.22. The blue chip index soared 130 points on Monday as oil prices fell back and alleviated some concern about accelerating inflation.
Broader indexes were also lower. The Standard & Poor’s 500 index fell 5.25, or 0.37 percent, to 1,398.33. And, the Nasdaq composite index declined 8.66, or 0.35 percent, to 2,479.83.
The better-than-expected retail sales report knocked Treasury prices lower. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.84 percent from 3.80 percent late Monday.
Oil prices edged up after falling briefly below $124 a barrel on profit-taking after it hit a record in the previous session. Light, sweet crude 41 cents to $124.64 a barrel on the New York Mercantile Exchange.
In addition to retail sales, the Commerce Department also reported that businesses added to their inventories in March by the smallest amount in a year, another indication of a weakening economy. Inventories edged up a tiny 0.1 percent in March, the smallest advance since they were basically flat in March 2007.
In corporate news, investors pored over a number of high-profile acquisitions, including Hewlett-Packard Co.’s offer to buy Electronic Data Systems Corp. for $12.6 billion. In addition, Staples Inc. raised its hostile bid to acquire Dutch rival Corporate Express NL.
The deal to combine Hewlett-Packard with EDS will create the second-largest technology services provider behind International Business Machines Corp. EDS shares added 38 cents to $24.46, while Hewlett-Packard fell $2.69, or 5.7 percent, to $44.14.
Staples rose 46 cents to $22.42 after the office supply retailer sweetened its offer price by 10 percent. Corporate Express said it is willing to consider the deal.
Investors got another read on the consumer after Wal-Mart Stores Inc. reported first-quarter profit above Wall Street forecasts. However, the world’s largest retailer, often a barometer of consumer spending in the U.S., forecast that the current quarter will come in below expectations.
Wal-Mart fell 89 cents to $57.13.
Luxury home builder Toll Brothers Inc. said preliminary results show homebuilding revenue fell 30 percent in its fiscal second quarter amid a weak spring selling season. The company also expects to continue to face “challenging times” ahead, given soft conditions in most markets. Shares edged up 6 cents to $23.43.
The Russell 2000 index of smaller companies fell 2.95, or 0.40 percent, to 730.28.
Declining issues beat advancers by a 3 to 2 basis on the New York Stock Exchange, where volume came to 330.9 million shares.
Overseas, Japan’s Nikkei stock average fell 1.53 percent. In morning trading, Britain’s FTSE 100 was down 0.29 percent, Germany’s DAX index fell 0.21 percent, and France’s CAC-40 shed 0.28 percent.
2008 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Comments
No comments yet.
Sorry, the comment form is closed at this time.