Stocks tumble as investors eye retail data
Wal-Mart, the world’s largest retailer, delivers rare sales decline
Updated: 47 minutes ago
NEW YORK - Wall Street suffered a sharp pullback Monday as investors returned from the Thanksgiving weekend with questions about the strength of the retail sector following a rare sales decline at Wal-Mart Stores Inc. The Dow Jones industrials fell 150 points.
Investors were uneasy after news that Wal-Mart, the world’s largest retailer, suffered a 0.1 percent drop in same-store sales, those from stores open at least a year. Same-store sales are the industry standard for assessing a retailer’s strength, and while retail sales overall were strong last weekend, Wal-Mart’s deficit raised concerns about the strength of consumer spending during the holiday season.
“There is now significant concern that the holiday retail season is going to underperform,” said Gregory Miller, chief economist at SunTrust Banks. “Traffic doesn’t necessarily translate into profits,” he said, referring to reports of crowded stores over the weekend.
Still, with stocks having soared the past two months, some retrenchment was to be expected as investors seek to preserve their profits.
...
Investors examining retail reports tried to determine whether an increase in traffic at stores would translate to higher profits for retailers. Consumer spending accounts for two-third of all economic activity, and Wall Street is concerned that weak spending would prevent the slowing economy from achieving a soft landing.
ShopperTrak RTC, which compiles sales data, estimates sales rose 6 percent on Black Friday from a year earlier.
Regardless of the pace of retail sales, however, stocks have posted strong gains in October and November, making Monday’s retreat unsurprising. Some on Wall Street may simply be hoping to hold onto their gains in the final weeks of the year as they look to lock in the performance their portfolios have shown.
“I think there are heightened concerns that the overall economy may be weaker than the markets had been anticipating when they drove the Dow over the top for a few successive periods,” Miller said. The Dow has closed at record levels 18 times since the beginning of October.
Miller also questioned whether retailers have run the risk of hurting profit margins by offering steep discounts to lure shoppers during an increasingly competitive Black Friday.
“The American consumer now expects that the holiday season isn’t just a time to spend a lot of money but a time to get some bargains. They expect the bargains will be significant.”
Wal-Mart was down $1.08, or 2.2 percent, to $46.83 following its first drop in same-store sales in about a decade, while some retailers moved higher following reports of strong traffic in stores over the weekend. Lowe’s Cos. rose 49 cents to $30.49.
J. Crew Group Inc. fell $2.78, or 6.4 percent, to $40.50 after a CIBC analyst lowered her rating on the clothing retailer based on valuation; the stock rose 22 percent last week following a strong profit report.
