Faltering consumer confidence sent retail stocks down 1.7 percent Friday, contributing to a 3 percent decline for the week.
On Friday, the Reuters/University of Michigan Surveys of Consumers said its Consumer Confidence Index fell during the first two weeks of August to 63.2 from 66. Economists’ median estimates had been 68.5, the news agency said.
Investors took the news relatively hard and pushed the S&P Retail Index down 6.21 points to 361.69 Friday, as the Dow Jones Industrial Average closed down 0.8 percent, or 76.79 points, to 9,321.40. The Dow fell 0.5 percent for the week.
The unforeseen drop in confidence was driven by a steep decline in consumers’ opinion of current personal finances, said Brian Bethune, chief U.S. financial economist at IHS Global Insight, in a research note.
“The preliminary report on consumer sentiment is a sober reminder of how much pressure households are under in terms of the huge cumulative declines in household wealth over the recession, trend increases in unemployment and underemployment and downward pressure on wages, salaries and benefits as companies have clamped down on costs,” Bethune wrote.
Earlier in the week, however, markets got a boost from the Federal Reserve, which came out with a relatively positive view of the economy.
The Fed said the economy had been “leveling out” since its June meeting and that financial markets had improved and household spending had stabilized some despite continued job losses.
“Businesses are still cutting back on fixed investment and staffing, but are making progress in bringing inventory stocks into better alignment with sales,” the Fed said.
Of the 174 apparel, retail and beauty firms tracked by WWD, 56 booked gains for the week, while 113 declined and five were flat.
Second-quarter earnings season for retailers began last week, with many stores posting weaker results, but still managing to overcome relatively low expectations from Wall Street.
Investors will get more information about how retailers fared in the second quarter and how they are planning for back-to-school and beyond when Saks Inc., TJX Cos., Sears Holdings Corp., Gap Inc., AnnTaylor Stores Corp. and a host of others report quarterly results this week.