Wall Street: Thursday close
CONSUMERS were added to the list of things investors have to worry about after Washington reported a surprising drop in retail sales in May.
US markets, which had enjoyed a late rally on Wednesday, back-pedalled on data suggesting consumers were keeping their purses zipped. The Dow Jones Industrial Average gave back all of Wednesday's gains and then some, falling 114.91 points or 1.2% to 9,502.80. The Nasdaq Index lost 22.23 points or 1.5% to 1,496.89.
The Commerce Department said May retail sales fell 0.9%, against a gain of 0.1% predicted by economists. Car sales slid 2.5%, providing evidence that the consumer, a stalwart during the recent shallow recession, was turning cautious.
Economists have worried that a combination of terrorist warnings, confrontations abroad, job lay-offs and diving confidence in company management might sap consumers' willingness to spend.
Personal consumption is often cited as making up two-thirds of the US economy and signs of a contraction cause worry lines in Washington and on Wall Street. Falling retail sales are often a harbinger of a slowing economy which in turn dampens profits.
The latest figures were an added worry because recent official economic figures had suggested the recovery had flattened after a robust first quarter. Retailers such as Wal-Mart lead the way down with a decline of $1.80 or 3% to $56.50.
Among the biggest losers were tech stocks which led Wednesday's late advance, helped in part by rumours that Microsoft was about to announce that its business was stronger than forecast. But that announcement did not come and Microsoft shares fell $1.32 or 2.4% to $54.22. Intel shed 47 cents or 2.2% to $21.11.
Food company HJ Heinz slid $2.05 or 5% to $39.05 on investor disapproval of a new plan to fold its slower growing brands including Star Kist tuna and 9-Lives cat food into Del Monte Foods with 74.5% of the combined company belonging to HJ Heinz shareholders.
Pharmaceuticals maker Bristol-Myers Squibb jumped $1.44 or 5.8% to $26.88 on a report that it had hired Goldman Sachs to look at options including a possible sale. US shares in GlaxoSmithKline, which has said BMY was on its radar screen, fell fractionally to $39.31.
Telecoms equipment maker Lucent dropped 15 cents or 5% to $2.80 after it issued another earnings warning, saying sales could come in 10% to 15% below expectations.
Conglomerate Tyco International rebounded $3.65 or 36% to $13.80 as it received approval to sell its CIT financial subsidiary, a development which would ease concerns about its liquidity.
