Wall Street sinks as recovery hopes hurt

Wall Street sinks as recovery hopes hurt
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First Published: Tue, Aug 18 2009. 04 00 AM IST
Updated: Tue, Aug 18 2009. 10 24 AM IST
New York: US stocks suffered their worst loss in seven weeks on Monday as weak data from Japan and a disappointing outlook from retailer Lowe’s Cos dampened hopes about the economy’s growth.
Japan’s gross domestic product showed its economy pulled out of recession in the second quarter, but at a slower pace than expected, prompting a sell-off in major Asian markets that spilled over into Europe and North America.
Lowe’s stock dropped 10.3% as the US home improvement company gave investors few reasons to be positive about the outlook for the consumer.
The results amplified worries about weak consumer spending following last week’s poor data on US consumer sentiment and retail sales.
“The GDP number in Japan sort of got things started when it missed this morning,” said Stephen Massocca, managing director of Wedbush Morgan in San Francisco.
But, he said, the sell-off in China was a big worry.
“A lot of people have seen China as kind of the reason we rallied to begin with. The Chinese economy was doing so well, it was leading us out (of the recession), and now that story is very much in jeorpardy.”
US selling was broad-based, but shares sensitive to the economy’s cycles fell the most, including industrials, down 2.9%, and financials, down 4.3%. The Dow Jones index of home builders’ shares fell 3.3%.
The Dow Jones industrial average dropped 186.06 points, or 2%, to end at 9,135.34. The Standard & Poor’s 500 Index slid 24.36 points, or 2.43%, to 979.73. The Nasdaq Composite Index lost 54.68 points, or 2.75%, to 1,930.84.
The Dow and the S&P 500 had their worst one-day percentage sell-offs since 2 July, while the Nasdaq had its worst since 22 June. The S&P 500, however, is still up about 45% from its early March lows.
Shares of heavy equipment maker Caterpillar Inc fell 4.5% to $43.95, leading the Dow’s major decliners.
The health-care sector outperformed other groups, with managed care companies boosted by the view that a public health-care plan was fading. The S&P managed health care index rose 2.6%.
In the retail sector, Lowe’s gave a third-quarter earnings outlook that was below expectations, and said it was slowing plans for expansion. Chief executive Robert Niblock said consumers remain under pressure even though housing is showing signs of bottoming out. Lowe’s stock dropped $2.36 to $20.47.
Shares of rival Home Depot Inc, a Dow component that is scheduled to report results on Tuesday, dropped 3.8 percent, or $1.03, to $26.11.
Offsetting some of the declines earlier was regional data from the New York Federal Reserve that showed the state’s factory sector was better than expected in August.
Volume was light on the New York Stock Exchange, with 1.22 billion shares changing hands, below last year’s estimated daily average of 1.49 billion, while on the Nasdaq, about 1.95 billion shares traded, below last year’s daily average of 2.28 billion.
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First Published: Tue, Aug 18 2009. 04 00 AM IST
More Topics: Markets | US | Stocks | Wall Street | Housing |