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Grim retail outlook latest blow
Wall Street approached the end of another highly volatile week with sharp losses after the latest bleak round of economic data showed retail sales slumped last month by the most since records began.
- By Alistair Gray, Financial Times
- Published: 23:41 November 15, 2008
New York Wall Street approached the end of another highly volatile week with sharp losses after the latest bleak round of economic data showed retail sales slumped last month by the most since records began.
The worse-than-expected 2.8 per cent decline, the fourth consecutive monthly drop, was the latest sign of a collapse in consumer confidence during the fin-ancial crisis and prompted a fresh wave of selling.
Alan Ruskin of RBS Global Banking & Markets said the figures were "even more dire than expected. Let's not dance about this, the data is awful".
By midday on Friday in New York, the S&P 500 stood 3.8 per cent lower at 877.12, the Dow Jones Industrial Average 3.4 per cent to 8,538.41 and the Nasdaq Composite Index 4.2 per cent to 1,530.35.
JC Penney and Nordstrom, the department store chains, were among several retail losers and were down 8 per cent to $17.73 (Dh65.14) and 8.2 per cent to $11.90 after the pair cut earnings forecasts.
Technology and telecoms came under further pressure. Sun Microsystems escaped the declines, up 0.7 per cent to $4.12, as the computer server group unveiled plans to cut up to 6,000 jobs. Traders took kindly to the move as it could save the company as much as $800 million a year, but feared it was a symptom of a broader malaise.
Qualcomm, which this week hosted its annual analyst meeting, lost 6.3 per cent to $32.62 after Nokia, the world's largest mobile phone maker, warned of lower sales due to "a sharp pullback" in consumer spending. They were the latest in a raft of bleak developments in the sectors this week, which included a surprise warning from chipmaker Intel.
Friday's declines took the weekly loss for the S&P to 5.8 per cent, for the Dow to 4.6 per cent and for the Nasdaq to 7.1 per cent.
Three straight days of falls pushed the market below the five-year intraday low hit last month. Stocks subsequently bounced in a spectacular rally late on Thursday as bullish traders snapped up battered stocks in the hope the market had set a new bottom.
Financials were the worst-performing sector, off 11.8 per cent overall last week after the US Treasury reversed course on its plan to mop up toxic mortgage assets. Citigroup hit a 12-year low, down 24.9 per cent for the week at $9.48, and reports on Friday said the bank was to cut at least 10,000 jobs.
American Express and CIT Group shed 21.1 per cent and 20.1 per cent respectively after the pair became the latest to seek approval to become a bank holding company as well as funding under the government's recapitalisation programme.
As fears over the health of the financial sector heightened, a series of grim developments elsewhere highlighted the bleak prospects facing corporate America in what is expected to be a severe downturn.
Technology and retail came under severe pressure on fears that both are particularly vulnerable in a protracted downturn.
Best Buy sent a chill through both sectors when the electronics chain warned of a "seismic" slowdown in consumer spending when it slashed annual profit forecasts. The bleak outlook disappointed traders who had hoped the chain could benefit after smaller rival Circuit City filed for bank-ruptcy, its shares shed 13.1 per cent over the week to $22.15.
Zero target
General Motors and Ford lost 31.2 per cent to $3 and 9.9 per cent to $1.82 despite hopes that Washington may save the industry from the brink of collapse. The weekly decline came after Deutsche Bank set a price target of zero.
Hopes were raised early in the week that China's $600 billion economic stimulus package could help hard-hit material and construction stocks. Yet the relief was short-lived.
Alcoa became the latest aluminium producer to cut production, with plans for a reduction of 350,000 tonnes a year.
Its shares lost 1.8 per cent over the week to $10.94.
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