NEW YORK (AP) — A dismal reading on retail sales and worries about the banking industry pounded the stock market Wednesday. Major stock indexes lost more than 3 percent, including the Dow Jones industrial average, which fell about 275 points, its sixth straight slide.
Although investors already knew that retailers suffered a terrible holiday season, a government report on December sales was much worse than anticipated. The Commerce Department said retail sales dropped 2.7 percent last month, more than double the 1.2 percent decline analysts forecast.
The pullback in sales marked a record sixth straight month of declines and was the latest sign of the troubles facing consumers. A steep drop in home prices, rising unemployment and difficulty accessing credit have given many consumers no choice but to pare their spending.
“No doubt the retail sales numbers that came in just reminded us how bad the fourth quarter is going to look,” said Jim Dunigan, managing executive of investments at PNC Wealth Management. “You take that on top of questions around the financial sector lingering, that’s not a prescription as we end the last days of the Bush administration.”
The weakness in consumer spending has been a major factor in the economy’s deterioration and analysts say they don’t see that improving soon. That’s troubling for investors because consumer spending accounts for more than two-thirds of U.S. economic activity. Many predict the recession, already the longest in a quarter-century, will persist at least until late this year.
Investors are also more concerned about the financial industry after Citigroup Inc., as expected, announced Tuesday it would give control of its Smith Barney brokerage business to Morgan Stanley and receive about $2.7 billion in much-needed cash.
Deutsche Bank AG’s announcement that it lost an estimated $6.4 billion in the fourth quarter intensified the market’s concerns that banks in general are still suffering and will need more government help.
The confluence of bad news and fears about extremely weak fourth-quarter earnings has sent stocks falling sharply this month. Wall Street had rallied during December and at the start of the year on hopes for an improving economy, but companies’ earnings and outlooks and the continuing stream of weak economic data have brought pessimism back to the market.
In late morning trading, the Dow fell 275.66, or 3.26 percent, to 8,173.90.
Broader indexes also declined. The Standard & Poor’s 500 index fell 32.98, or 3.78 percent, to 838.81, and the Nasdaq composite index fell 54.22, or 3.51 percent, to 1,492.24.
The Russell 2000 index of smaller companies fell 18.93, or 4.00 percent, to 454.86.
Declining issues outnumbered advancers by about 16 to 1 on the New York Stock Exchange, where volume came to a light 408.4 million shares.
Bond prices rose as stocks retreated. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.19 percent from 2.30 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, fell slightly to 0.11 percent from 0.12 percent late Tuesday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude declined $1.91 to $35.87 a barrel on the New York Mercantile Exchange.