NEW YORK (AP) — A profit warning from Wal-Mart Thursday touched off fresh worries about consumers’ willingness to spend and sent stocks lower for a second session. The Dow Jones industrial average fell 100 points.
The nation’s largest retailer said December sales at stores open for at least a year rose by 1.2 percent, including fuel, which was worse than analysts expected. Wal-Mart also slashed its projection for fiscal fourth-quarter earnings, and its shares fell more than 8 percent.
“This news out of Wal-Mart has taken a lot of people by surprise,” said Craig Peckham, market strategist at Jefferies & Co. The discount retailer has been viewed as having a good business model in a tough economy, he said.
Wall Street was prepared for bad numbers with the economy mired in recession but the plunge in cash register receipts at some stores startled some investors. The drop in sales at luxury retailer Saks Inc. was nearly double what analysts had forecast.
Industry analysts warned following Christmas that the season had turned out badly. But Wall Street nonetheless was unnerved by Wal-Mart’s numbers because discounters are expected to fare better in tough economies by attracting customers whose chief concern is low prices. Trouble at discount stores underscores the overall difficulties facing consumers.
Some investors had been prepared for terrible numbers from an array of retailers, said Bill Groenveld, head trader for vFinance Investments. He contends these investors are starting to back away during market selloffs and then returning to pick up the pieces.
“Instead of people selling into the rallies they’re starting to buy into the dips,” he said of the market’s shift away from the panic that dominated trading in the fall. “We know that earnings are going to be bad this quarter. We know there is going to be fluctuation.”
In early afternoon trading, the Dow fell 104.26, or 1.19 percent, to 8,665.44.
Broader stock indicators also declined. The Standard & Poor’s 500 index fell 7.87, or 0.87 percent, to 898.78, and the Nasdaq composite index fell 8.26, or 0.52 percent, to 1,590.80.
The Russell 2000 index of smaller companies fell 2.49, or 0.50 percent, to 494.61.
Declining issues outpaced advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 582.1 million shares.
On Wednesday, the Dow fell 245 points on worries about rising unemployment and a warning from technology giant Intel Corp. about poor business conditions. Bleak comments from aluminum producer Alcoa Inc. and media company Time Warner Inc. added to investors’ concerns.
The market’s fears about the economy are largely about the deteriorating job market. On Thursday, the Labor Department said the number of new claims for jobless benefits unexpectedly dipped last week, but the number of people continuing to file claims rose to a new 26-year high. And economists believe the government will report on Friday another massive jobs loss for December.
“The market has been bracing itself for a pretty grim number tomorrow,” Peckham said.
As the economy worsens, most on Wall Street are hoping that a stimulus package proposed by President-elect Barack Obama will win congressional approval. Obama said in a speech Thursday that the recession could linger if Congress doesn’t funnel unprecedented dollars into the economy. “In short, a bad situation could become dramatically worse,” he said.
Government bond prices rose as unease about the economy stoked demand for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.45 percent from 2.50 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest short-term investments, slipped to 0.07 percent from 0.11 percent.
The dollar fell against other most other currencies, and gold prices rose.
Light, sweet crude fell $1.05 to $41.58 a barrel on the New York Mercantile Exchange.
Among retailers, Wal-Mart fell $4.78, or 8.6 percent, to $50.76, while Saks declined 30 cents, or 6.8 percent, to $4.12.
Specialty retailer Limited Brands Inc. fell 99 cents, or 9.3 percent, to $9.71 after warning its fourth-quarter results will fall short of analysts’ expectations because of weak sales in December.
Target Corp., however, rose 35 cents to $59.30 after the retailer’s December sales declined less than Wall Street had expected.
In the tech sector, computer maker Dell Inc. said it would slash 1,900 jobs in Ireland, while Lenovo Group, another computer maker, warned it expects a loss for its latest quarter and will lay off 2,500, or 11 percent, of its work force worldwide. Dell fell 19 cents to $10.96; Lenovo shares plunged 26 percent in Hong Kong.