Posted at 11:40 a.m., Tuesday, August 14, 2001
Consumer spending fails to revive listless market
• Hawai'i Stocks
• Updated Market Chart
Associated Press
NEW YORK — Stocks drifted lower today, despite a better-than-expected Commerce Department report showing that the weak economy hasn't kept consumers from spending.
Retail stocks recorded some gains, but the news failed to spark the level of investor interest needed for broader buying.
"It's been like watching the EKG of a potato," said Todd Clark, co-head of trading at WR Hambrecht. "The market is doing nothing because we have every reason to do nothing.
"The prevailing view is that we don't have enough earnings visibility or visibility about when the economy is going to turn. As a result, any strength in the market has been met with selling."
The Dow Jones industrial average closed down 3.74 at 10,412.17, according to preliminary calculations, its second- straight session to finish nearly flat.
Broader stock indicators lagged. The Standard & Poor's 500 index dropped 4.56 to 1,186.73, while the Nasdaq composite index lost 17.72 to 1,964.53. The technology-focused index has now closed down seven of the last eight sessions.
The Commerce Department report released today found that although retail sales were flat overall in July, consumers are still buying clothes, beauty products and eating out. Much of the month's losses came from sluggish car sales and declining gasoline prices.
"This retail data was very important," said James Meyer, director of research at Janney Montgomery Scott, who suggested that federal tax rebates, which began arriving in mailboxes at the end of July, may have helped. "If you're looking for this economy to turn around, it starts with consumer spending."
But the market's reaction was guarded, in part because of indications by two bellwether retailers that tougher times are ahead.
Home Depot advanced $1.20 to $49.30 after reporting better-than-expected results, but cautioned the company remains wary about the rest of 2001. Wal-Mart rose 16 cents to $52.36 after meeting second-quarter expectations but cautioned second-half growth would be slower than it had previously forecast.
That hesitance spread to the rest of the market. Although stock prices rose early in the session, by afternoon they had fallen as investors sold their holdings to take advantage of the gains.
Technology stocks were mostly weaker. Microsoft slid $1.14 to $64.69 on speculation about whether its new Xbox video game system would be released as scheduled in November, while Ciena dropped $1.31 to $29.68.
Financial stocks lagged on news of more job cuts at Citigroup, which fell 38 cents to $48.75.
There were a few bright spots, including Johnson & Johnson, which rose $1.29 to $56.99 — a 52-week high.
Wall Street's difficulty in rallying comes after months during which the major stock indexes have made little progress. Analysts say investors are waiting for clearer signals that the business environment is improving, such as indications that orders are being placed again.
An interest rate cut from the Federal Reserve next week — the seventh such move of 2001 if it occurs — could reassure Wall Street and perhaps inspire a short-term rally, but no longer-term momentum, analysts said. Tax rebate checks spent this month should also provide some boost.
Advancing issues led decliners more than 3 to 2 on the New York Stock Exchange. Volume came to 952.07 million shares.
The Russell 2000 index gained 2.59 to 480.19.
Overseas, Japan's Nikkei stock average rose 3.8 percent. European stocks also did well. Germany's DAX index gained 1.2 percent, Britain's FT-SE 100 rose 1.4 percent, and France's CAC-40 advanced 0.9 percent.
