IMF Warning Hits Stocks

Retail sector down 1.7 percent in U.S.

U.S. retail stocks fell sharply today as the International Monetary Fund warned the prospects of the global economy have “deteriorated.”


The S&P 500 Retailing Industry Group fell 1.7 percent, or 11.50 points, to 659.55, as the Dow Jones Industrial Average declined 0.8 percent, or 110.12 points, to 13,473.53.


The retreat included Lululemon Athletica Inc., down 3.5 percent to $72.79; Ascena Retail Group Inc., 3.2 percent to $20.33; Amazon.com, 3.1 percent to $250.96; Perry Ellis International Inc., 2.9 percent to $20.69; Fifth & Pacific Cos Inc., 2.7 percent to $10.05, and Under Armour Inc., 2.7 percent to $54.12.


The IMF cut its global growth forecast to 3.3 percent, down from the 3.5 percent projected in July, and expansion of 3.8 percent last year. After two years of decline, growth is expected to rise again, to 3.6 percent, next year.


“The recovery continues, but it has weakened,” the IMF said. “In advanced economies, growth is now too low to make a substantial dent in unemployment. And in major emerging market economies, growth that had been strong earlier has also decreased.”


Efforts by central banks to lower interest rates are helping growth, but the IMF said there is also “a general feeling of uncertainty” at work.


“Worries about the ability of European policymakers to control the euro crisis and worries about the failure to date of U.S. policymakers to agree on a fiscal plan surely play an important role [in the uncertainty], but one that is hard to nail down,” the IMF said.


The projected 2012 growth rate for the U.S. economy was actually raised slightly to 2.2 percent from 2.1 percent, but the IMF said “weak household balance sheets and confidence, relatively tight financial conditions, and continued fiscal consolidation stand in the way of stronger growth.”


The stark reading of the global economy, with continued weakness in developed economies, is hurting export industries from other countries and sent a cold chill through European markets as well.


The DAX in Frankfurt fell 0.8 percent to 7,234.53, followed by the CAC 40 in Paris, down 0.7 percent to 3,382.78. The FTSE 100 in London sank 0.5 percent to 5,810.25 and the FTSE MIB in Milan declined 0.4 percent to 15,504.65.


The decliners included Tod’s, down 1.9 percent to 87.05 euros; LVMH Moët Hennessy Louis Vuitton, 1.5 percent to 118.55 euros, and Hermès International, 0.5 percent to 213.40 euros.


Managing to run countertrend were Marks & Spencer Group, up 3.2 percent to 3.81 pounds; Yoox, ahead 1.8 percent to 10.58 euros, and Safilo Group, up 0.9 percent to 6.31 euros.


The euro traded at $1.30 against the dollar while the pound traded at $1.61.