By and  on October 20, 2010

Markets tumbled Tuesday, pulling the Dow Jones Industrial Average below 11,000, after an unexpected interest rate hike in China that could rein in its quickly growing economy.

The selling pressure pushed the S&P Retail Index down 1.7 percent, or 7.84 points, to 456.92. The Dow slipped 1.5 percent, or 165.07, to 10,978.62, ending a seven-session run in which blue chip stocks had remained above 11,000.

Among the retailers losing ground were The Talbots Inc., down 7.4 percent to $10.07; Macy’s Inc., 5.7 percent to $22.64; The Men’s Wearhouse Inc., 4.9 percent to $24.11, and Nordstrom Inc., 3.9 percent to $37.34.

The steepest decline among issues tracked by WWD came from Coldwater Creek Inc., shares of which dropped $1.89, or 35.3 percent, to $3.47 after the misses retailer late Monday sharply reduced its third-quarter earnings guidance to a loss of 14 cents to 19 cents a share versus earlier projections of a 1 cent to 4 cent profit. Same-store sales are expected to be down between 18 percent and 21 percent.

FBR Capital’s Liz Dunn commented, “Misses’ retailers are struggling with how to appropriately adjust their assortment to fit the younger missy customer without alienating their older customer,” she said.

The People’s Bank of China raised its benchmark one-year deposit interest rate 2.5 percent from 2.25 percent, according to the official Xinhua news agency. The move toward higher interest rates would restrain growth in the Chinese economy and help counter rising prices.

The CAC 40 in Paris and the FTSE 100 in London each dipped 0.7 percent as the DAX fell 0.4 percent in Frankfurt.

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