The Federal Reserve's move to cut the primary interest rate on Tuesday by a quarter percent to 4.25 sent stocks plummeting in afternoon trading.
Retail shares were particularly hard hit as Wall Street was hoping for a deeper reduction in interest rates to spur the economy as it slogs through the subprime mortgage collapse.
The Dow Jones Industrial Average dropped 2.1 percent to close at 13,432.60, while the broader S&P 500 Index fell 2.5 percent to 1,477.59. The S&P Retail Index shed 4.2 percent to 425.63.
The rate cut was the third since September, and Fed officials said there could be additional cuts in the near future if the mortgage and housing crisis escalates.
Stocks were mixed for most of the day, but plunged following the rate cut. In the retail sector during the afternoon session, stocks were down between 2 and 5 percent. Trading volume was heavy.
At the bell, Wal-Mart Stores closed down 0.75 percent to $49.06, while rival discounter Target dropped 4.5 percent to $53.12.
Shares of department stores were also hit hard. Macy's slumped with a 4.2 percent decline to $29.13. Kohl's fell 5.9 percent to $49.46, while J.C. Penney saw shares decrease 4.5 percent to $45.73.
Teen apparel retailers Aéropostale, Abercrombie & Fitch and American Eagle Outfitters were down 6.3, 4.6 and 3.7 percent, respectively, to $24.72, $80.72 and $22.07, while Gap Inc.'s shares declined 5.1 percent to $20.43.
Separately, Mark Montagna, retail analyst at C.L. King & Assoc., maintained his "strong buy" rating on Dress Barn after David Jaffe, chief executive officer, offered bullish comments on key business segments in a report published in WWD.
Based on Jaffe's comments, Montagna believes the Maurices division remains strong, while Dress Barn continues to stumble. Shares of Dress Barn ended the day down 2.6 percent to $13.31.
In a separate report, Kimberly Greenberger, specialty retail analyst at Citigroup, highlighted Abercrombie & Fitch, The Children's Place and TJX Cos. as her three favorite stocks for the end-of-the-year period and for the beginning of next year.
Greenberger cited Abercrombie's accelerating international growth, strong direct sales, prudent inventory management and share repositioning to drive earnings-per-share growth as key factors to its continued success.
Off-price retailer TJX Cos. is in an ideal inventory position and should perform well in an environment where the consumer is looking to save, the analyst said.
"In our holiday outlook note, we conveyed our bullish view of the softline sector stocks, calling for a rally in our coverage universe over the next six to eight weeks," she said in the note. "However, given the rally across our coverage universe, we are more selectively putting money to work in the sector."
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews
@prada is introducing a new project at its men’s fall 2018 show this Sunday: “Prada Invites.” The fashion house invited four celebrated creative minds – @ronanaerwanbouroullec, Konstantin Grcic, @herzogdemeuron and @rem.koolhaas – to each create a unique item with its iconic nylon material. The designs will be unveiled on the runway show, which will take place at the company’s warehouse in Viale Ortles 25. #wwdfashion #mfwm (📷: @martinocarrera)
@kering_official is spinning off its stake in puma in an effort to focus on its luxury brands, the brand operator announced yesterday. “We are proud to have supported the turnaround of Puma, which now has unrivaled capabilities to take full advantage of the specific dynamics of its global markets and is poised to achieve substantial growth,” said François-Henri Pinault, Kering’s chief executive officer and chairman. Artémis will become a “long-term strategic shareholder” of Puma with a 29 percent stake. #wwdnews #wwdfashion (📷: @jilliansollazzo)
The fashion world mourns for celebrated street style photographer, Nabile Quenum, who died at age 32 in Paris.
Quenum, creator of the fashion blog “J’ai Perdu Ma Veste,” was a fashion week fixture, and regularly shot for New York magazine’s The Cut, among other outlets, and brands such as Louis Vuitton, Moncler and Adidas. He was also actively involved in the #NoFreePhotos initiative, which kicked off in the fall. Read more about Quenum in @kbsmoke's story on WWD.com. #wwdnews
@verwanggang and @maisonladuree have teamed up on a dessert collab called Vera Wang Pour Ladurée. The collection, which launched this week, features a specialty macaroon, as well as a wedding cake inspired by one of the designer’s gowns. “I could not imagine a more delicate or sophisticated creation to grace any couple’s celebration,” said Wang. #wwdfashion