Stocks fall sharply on consumer spending worries; Dow down nearly 700 points
The market began the day sliding on initial reports that the holiday shopping season, while better than some retailers and analysts feared, was mixed, a sign that Americans are very reluctant to spend. That has Wall Street concerned about the impact of a continuing drop in consumer spending on the sagging economy.
According to preliminary figures released by ShopperTrak RCT , a research firm that tracks total retail sales at more than 50,000 outlets, sales over the Thanksgiving weekend rose only modestly. Investors are worried that this portends a disastrous holiday season, which would be troubling not only for retailers, but for an economy that depends on consumers for more than two-thirds of its growth.
Meanwhile, downbeat economic reports on the manufacturing sector and construction spending only added to investors' concerns. Speeches from Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson also did little to assuage investors about the downturn.
That assessment made the retail sales figures all the more unnerving.
"Unfortunately, two-thirds of the American economy is based on the spending of the American consumer," said Mike Stanfield, chief executive of VSR Financial Services. "When the consumer pulls back, it's very hard for the economy to gain much traction."
Investors had been hopeful that last week's rally when the major indexes shot up by double digit percentages was a sign that some stability had returned to a market badly shaken by months of discouraging economic data. But analysts expect economic concerns to weigh on the market for some time to come.
"Everyone knows the recession is on us, the question is now will it be short and shallow or long and severe," Stanfield said.
Chuck Widger, chief executive of investment management firm Brinker Capital, expects the volatility to continue until investors have better visibility on the future.
"Investors are looking for better data on the economy," he said. "We've got baked in pretty nasty assumptions for the economy this quarter. The markets are looking ahead to the first quarter for data that will confirm or deny the bad news."
According to preliminary calculations, the Dow Jones industrial average fell 679.95, or 7.70 percent, to 8,149.09. The Standard & Poor's 500 index dropped 80.03, or 8.93 percent, to 816.21, while the Nasdaq composite index fell 137.50, or 8.95 percent, to 1,398.07.
Recent comments
Um, the earlier story, which was posted way early this morning, was a...
Schizo yeah | Dec. 1, 2008 at 1:02 p.m.
Choose your story, the one below about how the stocks are going to...
Schizophrenic Story | Dec. 1, 2008 at 11:07 a.m.
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Whoa | Dec. 1, 2008 at 10:21 a.m.
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