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Losses ease, but market slide continues
Losses ease amid gloomy news on retail sales and jobless claims
Question of the Day
Wall Street slipped for a second straight day Thursday on more gloomy news on retail sales and jobless claims, but investors avoided the big drop that produced the biggest daily decline this year in prices the day before.
“It’s clear we’re in a significant soft patch in the recovery,” said Stephen Wood, chief market strategist at Russell Investments in New York. “We still think economic growth is going to move upwards in 2011.”
The Dow Jones industrial average lost 41.59 points, or 0.3 percent to close at 12,248.55. That came a day after its biggest dive in nearly a year, when the index fell 280 points and erased much of the gains it had made this year. The S&P 500 broader stock index dropped 1.61 points, or 0.1 percent, to 1,312.94, compared to a fall of 30.65 points Wednesday.
The Nasdaq composite bucked the general trend, however, gaining 4.12 points to close at 2,773.31.
The week’s disappointing results reflect poor sales numbers brought on by high food and oil prices. In May, several retailers reported weak sales. Gap Inc. suffered a 2 percent decline in sales, while Target Corp. fell 1 percent.
“Consumer spending has held steady,” he said, “but people are putting a larger share of their paychecks into their gas tanks, which limits what they can spend at grocery stores, the mall or on other items.”
Gas prices in the District averaged about $4.03 on Thursday. In May, analysts forecast gas prices could drop as much as 50 cents to about $3.50 a gallon this summer. If that happens, it could spark renewed consumer spending.
“I think the wild card is oil prices,” Mr. Wood explained. “Any relief in oil prices would have a significantly positive impact on the economy.”
The decline in sales has put a strain on hiring. First-time applications for unemployment benefits came in higher than economists were expecting last week at 422,000.
“The job market is not recovering as much as forecast or hoped,” Mr. Wood said.
The disruptions caused by Japan’s earthquake and tsunami didn’t help, slowing down the manufacturing industry, Mr. Watkins said.
At the same time, several reports have showed the economy is slowing down. The payroll service ADP, for example, said private companies added 38,000 jobs last month, down from 177,000 in April.
Mr. Watkins said the economy is still waiting for a recovery in the housing market that also is pulling the market down. A report this week said home prices in March hit their lowest level in years.
But gasoline problems are expected to ease, and manufacturing will pick back up when Japan’s supply chains get back to full speed later this fall.
“I certainly don’t think we’re in a free fall here,” Mr. Watkins said. “I think the fundamentals of the economy are much better today than they were in recent years.”
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About the Author
Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at firstname.lastname@example.org.
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