It was a disappointing day for the equity market, as major indices ended near the day's lows, thanks to weakness in technology and retail stocks. With several important economic reports on tap for later this week, the market struggled through one of the lightest trading days of the year.
Dow Jones Industrial Average held to a tight range for the duration, but ultimately lost 49.85, or 0.47%, to 10,564.21, while the
Nasdaq Composite Index suffered through the day, ending down 106.92, or 2.7%, to 3767.92. Just 1.26 billion shares traded today, the eighth-lightest day on the
Nasdaq Stock Market
this year. The
S&P 500 dropped 10.95, or 0.75%, to 1446.00, as just 758.5 million shares traded hands on the
New York Stock Exchange, second fewest of any day this year.
On a day without much conviction, strategists surmise that the weakness reflects expectations of slowed economic growth in the months to come. It's one reason why retail stocks were among the day's weakest and, along with technology, exerted the greatest downward pull on the S&P and the Dow.
"Clearly, we would like a picture to be painted that gives us direction one way or another, but I don't think the environment lends itself to that," said Richard Cripps, chief strategist at
in Baltimore. "The economy is transitioning to a slowing, and it increases uncertainties -- the slowing is going to affect
and so on and so forth."
Retailers stunk up the floor of the exchange today, chiefly Wal-Mart and Home Depot, both Dow components. Home Depot closed down 2 1/8 to 46 1/16, its lowest close since October, and Wal-Mart lost 1 1/4 to 52 3/4. Among other retailers,
dropped 1 13/16 to 51 3/4 and
shed 3 7/16, or 5.5%, to 59.
Downbeat Depot Suffers With Peers
What little strength the market displayed was in oil production, oil service and a few other commodity-related sectors. The day's most prominent gainer was fiber optics company
, which soared after it upped earnings estimates for the second quarter.
Oil production and oil service stocks were all strong, as the price of crude oil per barrel reached $31 today, highest since March. A positive analyst call on
lifted that Dow component 1 9/16 to 80 3/4 today, while
gained 7/8 to 92 7/8.
rose 2 5/8 to 48 5/16, and
gained 1 9/16 to 73 1/16.
American Stock Exchange Natural Gas Index
gained 1.9% today, while the
S&P Chemical Index
was up 0.7%.
was one of the few holding up the Dow, gaining 1 1/16 to 129 5/8. Brokers were generally mixed, as the
American Stock Exchange Broker/Dealer Index
Figuring Out Which Numbers to Believe
figure will guide the market a bit, providing a clue as to whether April's decline was a fluke. Strategists don't seem to believe that consumer spending is slowing at anything more than an incremental rate.
Whereas in previous months economic reports that told of rising inflation were to be scoffed at, those reports are now gospel. And with blaring television reports of gasoline at $2 a gallon, last week's
Producer Price Index
, which was unchanged in May, was met with cries of "Don't you believe it."
"There's a general disbelief of these numbers," said Larry Rice, chief investment strategist at
. "The economy could be slowing from its current rip-roaring pace to a dull roar, while inflation is picking up, which is not good for P/E multiples."
That helps explain the suffering that retail stocks have been subjected to in recent months. While consumer spending is still seemingly strong, there's still an expectation that it's going to weaken due to higher prices.
"I haven't heard the phrase 'You should buy it now, because it's only going to cost more later' in 20 years," said a trader who asked not to be identified. "That's what I'm hearing now."
The economic environment is no longer as favorable as before, and that leaves the market in a pickle. A few more inflationary economic reports will get the market worried about the
Federal Open Market Committee again, and whether the panel will raise the short-term
fed funds rate at its June 27-28 meeting. On the other hand, should the economy be slowing, that's going to hurt profit margins and potential growth, also bad for equities.
A Chance for Fresh Confidence
Tony Cecin, manager of Nasdaq trading at
U.S. Bancorp Piper Jaffray
, believes the market will regain some confidence if this week's economic reports, which include the important
Consumer Price Index
, are benign enough to suggest that the Fed could indeed sit this next meeting out.
"There'll probably be a lag effect," Cecin said. "The market will be so happy that the Fed's done that we won't be worried about a slowdown for three months."
doomed itself from the start, lowering expectations for second-quarter earnings. The stock dropped 46% to 22 1/4 today.
Large-cap technology stocks licked their wounds throughout the session. The bellwether names, such as
(down 4 9/16 to 91 3/16) and
(off 2 1/4 to 62 1/8) held in reasonably well as selling in high-tech was concentrated in Internet and biotechnology stocks.
dropped 4%, leading the way down for other Net stocks, including
, which lost 7%, and
, which dropped 8.7%.
TheStreet.com Internet Sector
index dropped 48.43, or 5.1%, to 900.08.
Nasdaq Biotechnology Index
dropped 4.7%, led by declines in momentum types such as
Protein Design Labs
, off 8.8%, and
Human Genome Sciences
, which lost 9%.
Small- and mid-cap stocks were lousy today, as the
Russell 2000 dropped 2.8% and the
S&P MidCap 400
lost 1.6%. The
Dow Jones Utility Average
gained 1%, and the
Dow Jones Transportation Average
Breadth was poor on nonexistent volume.
New York Stock Exchange
: 1,402 advancers, 1,481 decliners, 758.5 million shares. 64 new highs, 44 new lows.
Nasdaq Stock Market
: 1,530 advancers, 2,563 decliners, 1.257 billion shares. 77 new highs, 63 new lows.
For a look at stocks in the news, see the Company Report, published separately.