Stocks fall on oil prices, Wal-Mart sales
Higher oil prices and sliding consumer confidence sent stocks plunging Tuesday as a weak sales report from Wal-Mart Stores Inc. raised concerns about discretionary spending. The Dow Jones industrial skidded almost 185 points.
Although the Conference Board’s consumer confidence index fell less than expected, investors were nervous about an eroding consumer picture after Wal-Mart blamed its modest sales on the impact of gasoline and utilities prices on its customers.
More declines for the U.S. dollar fueled jitters about inflation and slowing global growth amid sharp drops in overseas stock markets. A broker’s downgrade of General Motors Corp. also added pressure to the Dow industrials.
Tuesday’s selling followed three straight days of gains last week, when mild economic data calmed inflation fears and temporarily halted a steep two-week slide. Investors have been wary of the chance for more rate hikes; this week’s key figures on labor costs and wages are expected to provide some guidance on the Federal Reserve’s next move.
Ken Tower, chief market strategist for Schwab’s CyberTrader, said he was still optimistic about a growing consensus that the economy remains in good shape and that inflation is under control, which could keep the Fed from boosting rates.
“This pullback is not what you would’ve wished for, but it’s still in the context of a recovering market,” Tower said. “If we’re in an ongoing rally phase, this is where we ought to bottom out and see the market move higher.”
The Dow plummeted 184.18, or 1.63 percent, to 11,094.43, giving back all of the 180 points it gained in last week’s runup. The Dow lost 214 points on May 11, its biggest one-day decline in three years.
Broader stock indicators retreated sharply. The Standard & Poor’s 500 index dropped 20.28, or 1.58 percent, to 1,259.88; the Nasdaq composite index plunged 45.63, or 2.06 percent, to 2,164.74, falling back into negative territory for 2006.
Renewed uncertainty about interest rates sent bonds lower, with the yield on the 10-year Treasury note climbing to 5.08 percent from 5.05 percent late Friday.
Meanwhile, the U.S. dollar slumped against other major currencies as Wall Street questioned the impact of Henry Paulson’s nomination as Treasury secretary on the nation’s foreign exchange policy. Paulson, chairman and chief executive of Goldman Sachs Group Inc., is believed to push for a strong dollar to encourage the in-flow of foreign capital, but traders nonetheless expressed their anxiety.
The Conference Board said its consumer confidence index for May fell to 103.2 from a four-year high of 109.8 the month before, but the reading still topped estimates of 100.9. While investors have been hoping for a gentle economic slowdown, some fear that persistently high energy prices could trigger a sudden dropoff that leads the economy into a downturn.
Declining issues outpaced advancers by more than 3 to 1 on the New York Stock Exchange, where preliminary consolidated volume of 2.2 billion shares led the 1.93 billion shares that changed hands Friday.
The Russell 2000 index of smaller companies declined 18.51, or 2.54 percent, to 711.04.
Overseas, Japan’s Nikkei stock average fell 0.35 percent. Britain’s FTSE 100 lost 2.4 percent, Germany’s DAX index dropped 2.3 percent and France’s CAC-40 was lower by 2.42 percent.