- The Washington Times - Thursday, January 15, 2009

Wall Street opted for a sell-off Wednesday because of banking concerns and after the government reported that retail sales fell more than twice as much as expected during December’s holiday shopping season. The Dow dropped nearly 250 points in its worst day since Dec. 1.

At the close, the Dow Jones Industrial Average plummeted 248.42 points, or 2.94 percent, to 8,200.14. The Nasdaq Composite Index dived 56.82, or 3.67 percent, to 1489.64. The broader Standard & Poor’s 500 sank 29.17, or 3.35 percent, to 842.62. Financials, railroads and the oil services sectors got hit hard.

The Dow’s decline brought its losses to 9 percent in six successive days of red ink. The tech-laden Nasdaq sank below 1,500 for its toughest day since Dec. 11. Volume was light.

The price of a barrel of light, sweet crude oil dipped again and stood below $38 as the Energy Department said crude inventories grew by 1.2 million barrels for the week ended Friday, an indication of an increasingly sluggish economy.

The banking industry received another jolt when Deutsche Bank, Germany’s biggest, reported that it lost $6.4 billion during the fourth quarter. Germany has the biggest economy in Europe.

“The banks continue to lead the sell-off, and they’re down 5 percent today,” Steven Goldman, chief market strategist for Weeden & Co. of Greenwich, Conn., told The Washington Times. “It makes it difficult to have a sustained rally. The retail sales report didn’t help, though sometimes the market could have shrugged it off.” The Commerce Department reported a 2.7 percent drop in retail sales to a seasonally adjusted total of $343.2 billion, the biggest decline since October’s 3.4 percent plunge.

It marked the sixth consecutive month of falling sales and the longest losing streak for retail sales since the country was in recession in 1992, said PNC Financial Services Group of Pittsburgh.

The report came as some surprise because economists polled by Reuters had expected that retail sales would fall no more than 1.2 percent. If automobiles are excluded from the sales picture, total purchases dropped 3.1 percent.

In addition, the federal agency said that sales for November actually fell 2.1 percent, not the 1.8 percent previously reported.

The sales report was “yet another indication that the economy was in free fall in the fourth quarter, and the markets need to see evidence to show that this is not going to continue into 2009” before they can sustain a rally, Robert A. Dye, senior economist with PNC, told The Times.

The bleak sales reports only reconfirm the difficulties Americans face during a recession now in its 13th month, with households tightening their belts, credit hard to get, unemployment at 7.2 percent and worries about whether people will be able to keep their jobs.

Groceries were among the core components of the retail sales index that showed a slide. Others included furniture, clothing, sporting goods, general merchandise and restaurants.

Separately, the Federal Reserve said in a snapshot of business conditions that “overall economic activity continued to weaken” across nearly the entire country. Many retailers in the Philadelphia, Atlanta, Kansas City and Dallas areas “expected continued weakness or sluggish sales.”

“Weak earnings are expected to push many retailers into store closures and even bankruptcies,” Mr. Dye said in a report co-authored by PNC chief economist Stuart G. Hoffman.

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