Stocks sell off after Wal-Mart says same-store sales declined in November. The Nasdaq has its biggest one-day loss of 2006 as the dollar's decline prompts broad profit-taking. Crude oil moves over $60. Lowe's gets an upgrade.
Traders came back from the Thanksgiving weekend in a grinch-like mood, and the result was the stock market's biggest sell-off in nearly six months.
The Dow Jones industrials closed down 158.4 points, 1.3%, at 12,123. It was the biggest one-day point loss since the blue-chip index fell 166 points on July 13.
Meanwhile the Standard & Poor's 500 Index dropped 19 points, 1.4%, to 1,382. The Nasdaq Composite Index lost 54.34 points, 2.2%, to just under 2,406. The Nasdaq's point loss was its biggest of the year, beating a 54.11-point loss on Jan. 20.
Four factors combined to slam the market today:
Wal-Mart Stores. (WMT, news, msgs) The retail giant, a Dow component, said November same-store sales will decline for the first time in a decade, and the stock fell 2.7% on the day. While retail analysts insisted Wal-Mart has a unique set of problems, retail stocks generally were lower.
The dollar's decline. The dollar hit a 20-month low against the euro on Friday and was still falling today. A number of traders said that European investors were starting to sell U.S. stocks to protect the big gains they'd seen since the market bottomed in July, CNBC's Bob Pisani said. The dollar is down about 10% against the pound and euro and 1.5% against the yen in 2006. The decline hit stocks like Boeing (BA, news, msgs), down 2.7%; and IBM (IBM, news, msgs), down 2%.
Tech weakness. Techs stocks were broadly lower, in part because of heavy profit-taking. The Philadelphia Semiconductor Index ($SOX.X) was down 2.4% with 17 of 19 stocks lower on the day. It had been up 7.6% for the fourth quarter quarter after Friday trading; that gain has been trimmed to 5.3%. Also, a Barron's article (Subscription required) suggested Google (GOOG, news, msgs) was overvalued at more than $500. The stock was down 4% to just under $485 today, and it affected Amazon.com (AMZN, news, msgs), down nearly 3.7%; eBay (EBAY, news, msgs), down more than 3.7%; and Yahoo! (YHOO, news, msgs), down 2.7%. (One should note, as Barron's itself did, that the magazine opined in February that the stock was overvalued at $360.)
Oil prices. Crude oil was at $60.32 a barrel in New York, up $1.08 from Wednesday's close. Crude moved higher because of the possibility of colder weather in the country, an attack on Iraqi oil facilities and hints of another production cutback by members of the Organization of Petroleum Exporting Countries. The oil price increase was good for energy stocks; their losses were smaller than the market as a whole. Airline stocks were creamed with the Amex Airline Index ($XAL.X) falling 4.6%. Continental Airlines (CAL, news, msgs) was down 7.3%; American Airlines parent AMR (AMR, news, msgs) was down 5.9%. Like chips, airlines were also ripe for profit-taking.
Any way you looked at the market, it was lousy. Twenty-seven of the 30 Dow stocks were lower on the day. The winners -- Pfizer (PFE, news, msgs), ExxonMobil (XOM, news, msgs) and AT&T (T, news, msgs) had only small gains. Decliners were ahead of gainers by a 4-to-1 margin on both the New York Stock Exchange and the Nasdaq system.
Wal-Mart's woes hit everyone
On the surface, the news seemed great. Shoppers shopped with enthusiasm over the Thanksgiving weekend, spending $8.9 billion, a 6% jump from last year.
But Wal-Mart's declining sales for November cast a pall on the rosy picture.
Stock Charts (Year)
Wal-Mart Stores
The stock's weakness seemed to hit just about all retail stocks. Target (TGT, news, msgs) was down 0.45%. Federated Department Stores (FD, news, msgs), the parent of Macy's, fell 2.4%. And Best Buy (BBY, news, msgs) slipped 0.1%. The Standard & Poor's Retail Index ($RLX.X) slipped 0.7%.
The National Retail Federation estimates that 140 million people shopped Friday, spending $360.15 on average, up nearly 19% from the $302.81 people spent last year.
"This data show an even larger increase than expected," Bill Martin, co-founder of ShopperTrak RTC, told Marketwatch.com. The research firm compiles its estimate from sales statistics and data gathered from 45,000 electronic counting devices in enclosed malls and strip shopping centers.
Wal-Mart and other retailers will report final same-store sales numbers on Thursday.
Meanwhile, Wal-Mart is entering the India market, teaming up with an Indian telecommunications company, Bharti Enterprises, to open a chain of retail stores across India. India's retail market, estimated at $200 billion, is dominated by independent "mom and pop" shops, with branded retail making up only 3% of the market.
