Federal Reserve chairman Ben S. Bernanke offered a cautious view of the economy Wednesday, taking some of the steam out of Wall Street and pushing the Dow Jones Industrial Average back below 13,000.
In testimony before Congress, Bernanke described the pace of the recovery as “uneven and modest” and sounded a warning note on household spending.
“The fundamentals that support spending continue to be weak,” the Fed chief said. “Real household income and wealth were flat in 2011, and access to credit remained restricted for many potential borrowers. Consumer sentiment, which dropped sharply last summer, has since rebounded but remains relatively low.”
Investors took the words of caution to heart and pushed the Dow Jones Industrial Average down 0.4 percent, or 53.05 points, to 12,952.07. The index closed above 13,000 for the first time since 2008 on Tuesday.
The S&P Retail Index, still trading near all-time highs, slipped 0.6 percent, or 3.39 points, to 580.64. Among the day’s retail decliners were Liz Claiborne Inc., down 5.9 percent to $9.78; The Talbots Inc., 5.7 percent to $2.96; Charming Shoppes Inc., 5.2 percent to $5.65; Ann Inc., 4.3 percent to $23.89, and J.C. Penney Co. Inc., 4.2 percent to $39.60.
The Fed’s anecdotal Beige Book report also showed that mild winter weather forced retailers across the country to implement heavy markdowns on winter apparel to clear inventory.
Retail sales in Philadelphia, Atlanta, St. Louis, Minneapolis and Kansas City, Mo., during the period were higher than a year earlier. Retail sales in Richmond and San Francisco increased, while sales were “mixed” in New York and Cleveland. The Fed characterized retail sales in Dallas as “tepid,” and noted that consumer spending growth slowed in Chicago.
Mild winter weather was cited by retailers in Boston, New York, Philadelphia, Cleveland, Chicago and Dallas as a main factor that “depressed sales of seasonal items.”
“Markdowns on winter merchandise to clear inventory were reported in Boston, Chicago and Richmond districts,” the Fed said.
Retailers in Philadelphia “conceded that mild winter weather may have increased activity, although sales of winter clothes and gear have suffered.”
“Retailers [in Cleveland] told us that lower costs attributable to declining cotton prices were offset by a rise in overseas labor costs,” the Fed said. “Retailers are satisfied with their inventories except for cold-weather apparel, which is higher than desired.”
In Europe, stock markets were mostly down with London’s FTSE 100 retreating 1 percent to 5,871.51, followed by Frankfurt’s DAX, which tumbled 0.5 percent to 6,856.08, and Paris’ CAC 40, which dipped 0.04 percent to 3,452.45.
The FTSE MIB in Milan bucked the trend, rising 0.04 percent to 16,351.41.
Retail and luxury stocks were mostly up, with the day’s biggest gainers including Carrefour, which climbed 2.8 percent to 18.82 euros; Luxottica Group, 6.1 percent to 27.11 euros, and French Connection, 1.7 percent to 0.46 pounds.
The euro traded at $1.34, while the pound traded at $1.58.