Stocks Fall on Greece, Consumer Caution

NEW YORK (TheStreet) -- Stocks finished deep in the red Friday following another downgrade of Greece's credit ratings and fresh signs of a less confident U.S. consumer.

The Dow Jones Industrial Average closed down 93 points, or 0.7%, at 12,512. The S&P 500 fell 10 points, or 0.8%, to 1333, and the Nasdaq Composite dipped 20 points, or 0.7%, to 2803.

Fitch Ratings on Friday downgraded Greece's long-term foreign and local currency credit ratings to B+ from BB+ and added them and the country's short-term credit rating to the "rating watch negative" list.

"The rating downgrade reflects the scale of the challenge facing Greece in implementing a radical fiscal and structural reform program necessary to secure solvency of the state and the foundations for sustained economic recovery," Fitch said.

Shares of Gap(GPS) plunged 17.5% to end at $19.22 after the retailer slashed its earnings outlook for 2011, citing higher product costs. The company now sees earnings of $1.40 to $1.50 a share for the year. On Feb. 24, Gap forecast a profit of $1.88 to $1.93 a share in 2011. The current average estimate of analysts polled by Thomson Reuters is for earnings of $1.83 a share. Gap shares were tanking 17.3% to $19.26.

Gap's earnings miss was in keeping with an emerging theme in the retail sector. Retailers who reported earnings this week, even those that managed to top estimates, weren't overly optimistic about the state of the consumer going forward, prompting many to lower guidance.

Earlier this week Children's Place(PLCE) raised the low end of its full-year forecast, but its annual outlook and second-quarter forecast missed Wall Street's expectations.

Ross Stores(ROST) reported a better-than-expected quarterly profit, as shoppers flocked to its off-price merchandise, but the company didn't raise its guidance enough to please investors GameStop's(GME) problems were more of the same. The video game retailer topped forecasts, but issued a below-consensus outlook, projecting flat same-store sales for the second quarter. Children's Place sank 6.6% to $50.58, Ross Stores ended flat at $80.79 and GameStop rose 2.1% to $27.88 on Friday.

Wall Street's jitters are not without merit. The retail sector is facing several headwinds heading into the second half of the year, specifically higher sourcing costs and mounting gasoline prices. This scenario creates even more pressure headed into the summer season, which is traditionally somewhat hum-drum.