Stocks fall as retail sales data disappoint
NEW YORK (AP) ó Stocks fell Tuesday after an unexpected drop in retail sales tested a notion that the economy is starting to find its footing.
The poor showing for retail sales in March overshadowed better-than-expected profit reports from Johnson & Johnson and Goldman Sachs Group Inc.
In late morning trading, the Dow Jones industrial average fell 60.45, or 0.8 percent, to 7,997.36.
Broader market measures also lost ground. The Standard & Poor’s 500 index fell 6.05, or 0.7 percent, to 852.68, and the Nasdaq composite index fell 9.53, or 0.6 percent, to 1,643.78.
Financial stocks showed some of the steepest losses even after Goldman’s results came in well ahead of what analysts had been expecting. Citigroup Inc. and JPMorgan Chase & Co. are also due to report quarterly results this week.
Federal Reserve Chairman Ben Bernanke’s assertion Tuesday there have been “tentative signs” of easing in the recession appeared to keep some investors from hitting the “sell” button. Stocks have surged for five weeks as traders bet that banks are working through some of their biggest troubles and the economy’s woes aren’t worsening.
Wall Street couldn’t avoid disappointment over the Commerce Department’s report that retail sales fell 1.1 percent in March, the biggest drop in three months. Analysts polled by Thomson Reuters had expected an increase of 0.3 percent. In one bright spot, February retail sales were revised to show modest growth rather than the slight dip originally reported.
“The choppy data that we’re seeing, whether it’s economic or earnings, reminds us that we’re still not out of the woods,” said Sean Simko, head of fixed income management at SEI Investments in Philadelphia.
The government also said businesses reduced inventories by 1.3 percent in February, close to the 1.2 percent fall that economists had been expecting. Investors are hoping businesses will be able to work through inventory and better align costs with demand.
Simko said the mixed data could keep a useful check on the market’s advance. “The market always has a tendency to go too far too fast,” he said.
The drop in stocks followed more signs that companies reporting earnings for the January-March quarter might be able to beat Wall Street’s modest expectations.
Johnson & Johnson said its first-quarter profit dipped, but not as much as expected. The health care products maker earned $3.5 billion, or $1.26 per share, above analysts’ estimates of $1.22 per share. J&J, one of the 30 stocks that make up the Dow, rose $1.05, or 2 percent, to $52.20.
Goldman unexpectedly released its results a day early on Monday, reporting after the closing bell that it earned $1.66 billion in the quarter, well above what analysts were expecting, and would raise $5 billion in stock in hopes of repaying the $10 billion investment it received from the government last year.
Goldman shares fell $7.72, or 5.9 percent, to $122.42 after its share offering.
Some other financial stocks also slid. JPMorgan fell $1, or 3 percent, to $32.70, while Morgan Stanley fell $1.58, or 5.9 percent, to $25.31.
In other market moves, the Russell 2000 index of smaller companies fell 6.24, or 1.3 percent, to 461.81.
About four stocks fell for every three that rose on the New York Stock Exchange, where volume came to 592.3 million shares.
Bond prices rose, pushing the yield on the 10-year Treasury note down to 2.82 percent from 2.86 percent late Monday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell 15 cents to $49.90 on the New York Mercantile Exchange.
Overseas, Japan’s Nikkei stock average fell 0.9 percent. In afternoon trading, Britain’s FTSE 100 rose 0.4 percent, Germany’s DAX index gained 2 percent, and France’s CAC-40 rose 1 percent.