NEW YORK Wall Street finished the week with a decline Friday as the financial health of the consumer came into focus following a report that showed personal spending at its weakest growth in 17 months and a profit warning from J.C. Penney Co.
After weeks of concentrating on credit problems and interest rates, the market was forced to pay attention to the consumers who drive economic growth. The Commerce Department said consumer spending ticked up a paltry 0.1 percent last month, which was in line with Wall Street's expectations. But that news and the profit warning from J.C. Penney offered renewed room for concern about the well-being of consumers.
The market felt some relief after the government said an important inflation gauge tied to consumer spending rose only 0.1 percent when excluding often-volatile energy and food costs. The reading the Federal Reserve's preferred measure of inflation is up 2 percent over the past 12 months. With so-called core inflation back within the Fed's target of 1 percent to 2 percent, it could be easier for the central bank to justify further interest rate cuts without fear of adding too much money to the economy and driving up prices.
Trading was fairly muted following a week of high volatility that sent stocks sharply higher early in the week and then plunging near the end. Investors were able to set aside some concerns about the effects of the credit crisis on the financial sector, but that gave them more time to think about the economy.
"I'm viewing a day like today as sort of a continuation from where we were a month or two ago," said Les Satlow, portfolio manager at Cabot Money Management in Salem, Mass. "The U.S. recession concerns have resurfaced. They never went away but there was the beginning of the sense that this recession was going to be shallow and maybe a bit benign."
According to preliminary calculations, the Dow Jones industrial average fell 86.06, or 0.70 percent, to 12,216.40.
Broader stock indicators slipped. The Standard & Poor's 500 index fell 10.54, or 0.80 percent, to 1,315.22, and the Nasdaq composite index fell 19.65, or 0.86 percent, to 2,261.18.