Stocks lost ground Tuesday, after a major retailer’s downbeat forecast caused Wall Street to worry about prospects for the crucial holiday selling season.
The Dow Jones industrial average, which was up 44 points at an eight-month high in the afternoon, retreated late in the session and ended the day down 10.73, or 0.1 percent, at 10,686,44.
The day didn’t lack for good news: Oil prices declined to a more than four-month low, and a wholesale-prices report suggested high energy costs haven’t yet caused long-term economic damage.
In addition, the Commerce Department reported that retail sales, excluding autos, were significantly stronger than expected for the month of October.
Wall Street opted to overlook those positive developments, however, and to focus instead on Target’s unexpected warning that November sales won’t grow as fast as management had earlier projected.
Investors reacted with dismay to the admission from the recent Wall Street favorite: A high-volume sell-off sent the Minneapolis-based company’s shares down 7.1 percent, to $54.30.
Target’s unsettling forecast, which was in unfortunate contrast to a relatively optimistic holiday-sales forecast issued by Wal-Mart, helped pull down much of the retail sector.
Consumer-electronics retailer Best Buy dropped 5.6 percent, to $43.89, and rival Circuit City declined 3.5 percent, to $19.01. Gap shares dropped, and so did those of Target’s direct discount-retail rivals, Wal-Mart and Costco.
Home Depot shares slipped slightly, even though the company reported better-than-expected third-quarter earnings in the morning. The building-products retailer wasn’t the only company to announce upside quarterly results, only to see its stock decline. The same thing happened to department-store chain J.C. Penney, off-price retailer TJX and Saks Fifth Avenue Enterprises.
American Eagle’s quarterly results also outperformed expectations, but the apparel retailer offered a cautious sales forecast for the current period. Its stock fell 4.7 percent, to $23.21.
The bloodletting in retail stocks didn’t include Hoffman Estates-based Sears Holdings. Positive coverage in a financial newspaper helped shares climb 2 percent, to $115.80.
Even as investors fretted over holiday sales, the popular stock indexes, which have risen strongly over the past three weeks, remained at or just below their highest levels in several months.
The Dow was pulled lower not only by the weakness of retail components Wal-Mart and Home Depot but by a 4.8 percent drop in automaker General Motors, as well as softness in financial stocks, such as Citibank and JPMorgan.
The broader Standard & Poor’s 500 index slid 4.75 points, or 0.4 percent, to 1229.01. And the Nasdaq composite index, which is historically more volatile because of its large high-tech component, fell 14.21, or 0.6 percent, to 2186.74.
In New York Mercantile Exchange trading, crude oil for December delivery fell 71 cents, to $56.98 a barrel, the lowest close since June, in response to warm weather and evidence that oil inventory is strengthening.
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Treasury securities strengthened, helped by a reassuring performance from Federal Reserve Chairman nominee Ben Bernanke during Senate confirmation hearings. The benchmark 10-year note rose a solid 11/32, to yield 4.56 percent.
Local stocks: Northfield Labs shares jumped 7.5 percent, to $13.39, after the latest interim analysis of its late-stage Phase 3 trial of its still-experimental Polyheme blood-substitute product called for the trial to proceed without any changes.
Go figure: OfficeMax’s bigger industry rival Staples reported modestly disappointing profits Tuesday, sending Staples stock 4.4 percent lower. Office Depot shares also slipped, by only a couple of pennies. But shares of OfficeMax climbed 4.4 percent, to $29.25. Maybe that’s because the Itasca company’s biggest shareholder, K Capital, has recently renewed its public calls for management to improve what the hedge fund has called OfficeMax’s “dismal” financial performance.
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