Aggressive selling in the final hour of trading dropped U.S. retail stocks 1.2 percent Wednesday and led the Dow Jones Industrial Average to its first sub-10,000 close since Feb. 8.
This story first appeared in the May 27, 2010 issue of WWD. Subscribe Today.
Prior to the stormy finish on Wall Street, global markets recovered from severe declines the day before, when saber rattling on the Korean Peninsula and Europe’s debt problems spooked investors.
After dwelling in positive territory much of the day, the S&P Retail Index in the last hour of trading sold off heavily, ending the day down 5.36 points, or 1.2 percent, at 435.24. Since coming within a fraction of the 500 mark on April 26, it’s pulled back 12.9 percent.
While the Dow had slid below 10,000 on two of the three previous trading days, it had managed to close out both sessions above the five-digit line. But heavy selling on high volume in Wednesday’s closing minutes rendered that an impossibility. The Feb. 8 close, at 9,908.39, was the only other under-10,000 closing number of the year before Wednesday.
Among the 172 fashion, beauty and retail firms tracked by WWD, none had a larger decline than American Eagle Outfitters Inc., whose shares slid 16.6 percent to $12.82 after the firm reported a loss on par with analysts’ expectations but projected second-quarter earnings below Wall Street expectations. Right behind American Eagle was Zale Corp., with a 6 percent decline in shares to $2.52 after it reported a smaller-than-expected third-quarter loss. (For more on retail earnings, see page 14.)
Unlike their counterparts in the U.S., markets in Asia and Europe rebounded from Tuesday’s decline. The Hang Seng Index rose 1.1 percent to 19,196.45 in Hong Kong and the Nikkei 225 advanced 0.7 percent to 9,522.66 in Tokyo. The CAC 40 rose 2.3 percent to 3,408.59 in Paris, the FTSE 100 advanced 2 percent at 5,038.08 in London and the DAX moved ahead 1.6 percent to 5,758.02 in Frankfurt.
The general rebound was aided by a rosier outlook from the Organization for Economic Co-operation and Development, which said the collective GDP of its 31 member countries would rise 2.7 percent this year, up from the 1.9 percent the group predicted in November.
But the good news came with a warning.
“This is a critical time for the world economy,” said Angel Gurría, the group’s secretary-general. “Many OECD countries need to reconcile support to a still fragile recovery with the need to move to a more sustainable fiscal path. We also need to take into account the international spill-overs of domestic policies.”