Stocks open lower as jitters about retail return

NEW YORK — Wall Street's worries about weak consumer spending revived Thursday, sending stocks lower as bad news from Wal-Mart Stores Inc. signaled that even the stronger U.S. retailers struggled during the holiday shopping season. The Dow Jones industrials fell by 100 points.

The nation's largest retailer said December sales at stores open for at least a year rose by 1.2 percent, including fuel, which was worse than analysts expected. Wal-Mart also slashed its forecast for fourth-quarter earnings, and its shares fell more than 8 percent in the early going.

"This news out of Wal-Mart has taken a lot of people by surprise," said Craig Peckham, market strategist at Jefferies & Co. The discount retailer was viewed as having a good business model in a tough economy, he said.

Other retailers brought more disappointment. Macy's managed to post better-than-expected December sales, but the department store operator lowered its fourth-quarter outlook and said it was closing 11 stores.

The poor numbers from most retailers weren't a surprise after industry analysts had warned following Christmas that the season had turned out badly. But Wall Street became unnerved when a company like Wal-Mart cut its forecast. Normally, discounters are expected to fare better in tough economies because they can attract customers whose chief concern is low prices. So trouble at discount stores underscores the overall difficulties facing consumers.

The cutback in consumer spending has been a result of the deteriorating job market. On Thursday, the Labor Department said the number of new claims for jobless benefits unexpectedly dipped last week, but the number of people continuing to file claims rose to a new 26-year high. And economists believe the government will report on Friday another massive jobs loss for December.

"The market has been bracing itself for a pretty grim number tomorrow," Peckham said.

As the economy worsens, most on Wall Street are hoping that a stimulus package proposed by President-elect Barack Obama will win congressional approval. Obama said Thursday the nation's recession could "linger for years" unless Congress acts, according to the text of a speech to be delivered at George Mason University in Fairfax, Va.

In midmorning trading, the Dow fell 99.16, or 1.13 percent, to 8,670.54.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 8.11, or 0.89 percent, to 898.54, and the Nasdaq composite index fell 12.87, or 0.80 percent, to 1,586.19.

The Russell 2000 index of smaller companies 3.62, or 0.73 percent, to 493.48.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 117.8 million shares.

Comments