NEW YORK – Wall Street skidded lower Thursday as investors grappled with concerns about the strength of consumer spending and the overall economy after downbeat comments from J.C. Penney Co. and Wells Fargo & Co.
Investors soured on retailers and banks, while falling oil prices hurt shares of energy companies.
Wall Street is concerned about rising gas prices. Although oil has come off the highs seen last week, prices remain elevated and could crimp consumer spending as the holiday shopping season approaches.
“The J.C. Penney comments in terms of their guidance have sort of put another nail in retail. The assumption is the consumer has given up,” said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh. “Three-dollar to $3.20 a gallon gas and house prices falling at 5 percent a year is really a double-whammy the consumer can’t overcome.”
Wells Fargo president and chief executive John Stumpf said the housing market is seeing its steepest decline since the Great Depression. The bank has boosted its loss provisions in recent quarters to cover increasing defaults on mortgages and home-equity products. Still, the company has been able to avoid big writedowns that other banks have faced because it has little exposure to some complex financial instruments such as mortgage-backed securities that have recently soured.
Investors also reacted to a Barron’s report late Wednesday that a General Electric Asset Management bond fund has suffered losses in mortgage-backed securities. The General Electric Co. unit is offering investors the option to redeem their holdings in the short-term institutional bond fund at 96 cents on the dollar. The losses in the bond fund raised concerns that the squeeze on credit markets could spread and hurt small investors.
Barclays Group said its Barclays Capital investment unit became the latest financial institution to book a writedown on losses stemming from turbulent credit markets. The business took a $2.7 billion charge in the third quarter but also said Thursday its profit beat last year’s strong performance.
The Dow Jones industrial average fell 120.96, or 0.91 percent, to 13,110.05.
Broader stock indicators also declined. The Standard & Poor’s 500 index fell 19.43, or 1.32 percent, to 1,451.15. The Nasdaq composite index fell 25.81, or 0.98 percent, to 2,618.51. Government bond prices rose. The yield on the 10-year Treasury note, which moves opposite its price, slid to 4.14 percent from 4.25 percent late Wednesday.
Major stock indexes overseas slumped. Britain’s FTSE 100 declined 1.13 percent, Germany’s DAX index fell 1.49 percent, while France’s CAC-40 shed 0.93 percent.
Japan’s Nikkei stock average closed down 0.67 percent and Hong Kong’s Hang Seng index fell 1.42 percent.