Dispiriting Session Sees Stocks Tumble on Low, Low Volume - TheStreet

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.

The

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

Legg Mason

in Baltimore. "The economy is transitioning to a slowing, and it increases uncertainties -- the slowing is going to affect

Wal-Mart

(WMT) - Get Report

,

Home Depot

(HD) - Get Report

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,

Kohl's

(KSS) - Get Report

dropped 1 13/16 to 51 3/4 and

Best Buy

(BBY) - Get Report

shed 3 7/16, or 5.5%, to 59.

Downbeat Depot Suffers With Peers
Home Depot, one year

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

Corning

(GLW) - Get Report

, 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

ExxonMobil

(XOM) - Get Report

lifted that Dow component 1 9/16 to 80 3/4 today, while

Chevron

(CHV)

gained 7/8 to 92 7/8.

Halliburton

(HAL) - Get Report

rose 2 5/8 to 48 5/16, and

Schlumberger

(SLB) - Get Report

gained 1 9/16 to 73 1/16.

The

American Stock Exchange Natural Gas Index

gained 1.9% today, while the

S&P Chemical Index

was up 0.7%.

J.P. Morgan

(JPM) - Get Report

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

lost 0.8%.

Figuring Out Which Numbers to Believe

Tomorrow's May

retail sales

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

Josephthal

. "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."

Citrix Systems

(CXTS)

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

Apple

(AAPL) - Get Report

(down 4 9/16 to 91 3/16) and

Cisco

(CSCO) - Get Report

(off 2 1/4 to 62 1/8) held in reasonably well as selling in high-tech was concentrated in Internet and biotechnology stocks.

Yahoo!

(YHOO)

dropped 4%, leading the way down for other Net stocks, including

Amazon.com

(AMZN) - Get Report

, which lost 7%, and

eBay

(EBAY) - Get Report

, which dropped 8.7%.

TheStreet.com Internet Sector

index dropped 48.43, or 5.1%, to 900.08.

The

Nasdaq Biotechnology Index

dropped 4.7%, led by declines in momentum types such as

Protein Design Labs

(PDLI) - Get Report

, off 8.8%, and

Human Genome Sciences

(HGSI)

, 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

lost 0.3%.

Market Internals

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.