Global economic fears sparked another dramatic stock sell-off around the world Thursday.
Retail stocks plummeted 4.2 percent amid another wild sell-off spurred on by the twin fears of another recession and the impact of shaky European debts on major banks.
The S&P Retail Index retreated 20.73 points to 471.99 as the Dow Jones Industrial Average declined 3.7 percent, or 419.63 points, to 10,990.58 — only the third close below 11,000 since October. Among the hardest hit in fashion were Abercrombie & Fitch Co., down 9.7 percent to $58.60; PVH Corp., 9.7 percent to $54.77; Tiffany & Co., 7.9 percent to $59.21, and J.C. Penney Co. Inc., 7.8 percent to $23.81.
Wall Street took its lead from overseas, where the CAC 40 fell 5.5 percent in Paris, the FTSE 100 slid 4.5 percent in London and the Hang Seng Index declined 1.3 percent in Hong Kong.
The global sell-off helped the U.S. dollar rise against other currencies. Gold rose 4.7 percent to $1,826.70, and the yield on the U.S. 10-year note fell below 2 percent as investors exited the equity markets in favor of safe havens.
The stock decline, however, was a big step back for markets, which stabilized some this week after starting off the month in free fall as the European debt crisis flared, followed by Washington’s last-minute deal on the debt ceiling and Standard & Poor’s controversial downgrade of U.S. credit.
Fears of continued economic weakness have fanned the fire. Most recently, it was Morgan Stanley that warned that the global economy was “dangerously close to recession.” The bank cut its global GDP growth forecast to 3.9 percent this year from 4.2 percent.
“Our revised forecasts show the U.S. and the euro area hovering dangerously close to a recession…over the next six to 12 months,” Morgan Stanley said. “It won’t take much in the form of additional shocks to tip the balance.”
The immediate worry is that all the negativity will cause wary consumers to pull back.
“The real concern from the last couple of weeks of market turmoil is the ultimate impact on the consumer’s psychology and purchasing habits,” Mike Calbert, head of the retail investment group at private equity giant KKR.
Walter Loeb, retail consultant of Loeb Associates and former retail analyst, said, “I still think the consumer will spend for Christmas, but consumers are value conscious and they won’t buy unless an item is on sale. Many retailers have planned sales for the season, but they will now have to sharpen their prices. Back-to-school will be weak, as people had already delayed shopping due to the hot weather and elected to buy in time of need.”
Loeb said it was too late for retailers to cut back on inventories, since orders are already coming in from China. “Retailers will have to reprice their sales and take the lower margin. That means that there will be pressure on the third- and fourth-quarter earnings results.”
And while there were also concerns about a rising unemployment rate, economist Maury Harris of UBS said, “Despite heightened anxiety about the economic outlook recently, the trend in jobless claims has not shown any sign of renewed weakness. While new jobless claims edged up a bit in the week of Aug. 13 to 408,000, from 399,000, the four-week average improved to 403,000 from 406,000 the prior week.” The four-week average is considered a better measure of trends on the labor front.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews