NEW YORK — The assassination of Hamas founder Sheik Ahmed Yassin, 5,700 miles from Wall Street, sent retail stocks into a tailspin Monday, with luxury shares getting hit the hardest.

Adding to the pressure from a relentless stream of bad news — unemployment, oil prices, terrorism and now more Mideast violence — the Dow Jones Industrial Average fell 121.9 points, or 1.2 percent, to close at 10,064.8, the S&P 500 dropped 14.3 points, or 1.3 percent, to settle at 1,095.4 and the S&P Retail Index shed 6.3 points, or 1.6 percent, to finish at 381.5.

This story first appeared in the March 23, 2004 issue of WWD. Subscribe Today.

Moreover, since the beginning of the month, the S&P 500 and Retail indices have fallen 4.2 and 3.7 percent, respectively, giving up about half of their gains so far this year. Meanwhile, the Dow continued digging its fiscal 2004 trough, having now lost 223.3 points since Jan. 2, with the bearishness becoming more oppressive of late: Monday trading represented the fifth time in nine sessions that the Dow suffered a triple-digit decline.

The luxury segment, which includes companies that have experienced some of the most robust same-store sales results during the past few months, experienced a steep falloff in share prices, shedding, on average, more than 2 percent of their values: among them, Neiman Marcus was off 3 percent, closing at $52.25, while Saks Inc. was down 1.1 percent, closing at $16.04 and Nordstrom was down 0.75 percent, ending the day at $37.05.

Industry observers stress, however, that fundamental corporate operations and the economy are sound and consumer spending shows no sign of abating. With an absence of major economic news on which to peg trading, and while sitting in the quiet period between quarterly earnings, investors are reacting, and perhaps overreacting, to the seemingly endless string of horrors in the headlines.

“Today the stock market declined simply out of fear of retaliatory action for the assassination in the Middle East,” said Kurt Barnard of Barnard’s Retail Trends Report, referring to the retail sector. “Whether that is true, we can’t validate it. We have to keep in mind the market has risen over the last year something like 70 percent. I think the pause that refreshes may actually be active at this moment.”

Barnard said despite the latest assault on share prices, consumers have continued to spend, making the sector sturdy and resilient. Indeed, the robust performance of the equity markets has helped fuel consumer spending.

“Retailing has performed well despite the joblessness factor, but you have to keep one thing in mind: there are lots of people who do have jobs, who earn decent incomes,” Barnard said. “For the past year, the stock market has been consumer friendly. A lot of people benefited by simply seeing their net worth increase.”

It’s also important to note that consumers have been responding positively to spring apparel merchandise sets, which are adorned with prints and brilliant colors.

So, although Monday was a tough day for many apparel retailers and vendors, there were a number of bright spots as well. While some of the hardest-hit retail stocks were those in the relatively high-risk specialty store channel, that sector also provided a number of pleasant surprises.

On one side of the ledger, shares of Aeropostale Inc. declined 4 percent, or $1.40, to close at $33.73, Bebe Stores Inc. decreased 3 percent, or 92 cents, to finish at $29.87 and Urban Outfitters Inc., which saw its market capitalization shoot up more that 370 percent in the last 12 months, dropped 2.4 percent, or $1.04, to settle at $42.68.

However, Goody’s Family Clothing Inc. had an outstanding day by any measure, as its stock grew 7 percent, or 83 cents, to close at $12.76, while Guess Inc.’s shares improved 0.4 percent, or 7 cents, to finish at $17.25.

And although Limited Brands Inc.’s stock declined, 0.7 percent or 13 cents, to close at $19.29, the company had bullish news going forward, upping its first-quarter earnings guidance. The Columbus, Ohio-based retailer, which operates mall staples like Victoria’s Secret and Express, said it now anticipates earnings per share to be between 11 and 13 cents, versus its previous guidance of flat. Additionally, Limited raised its first-quarter comparable-store sales guidance to be in the positive low-double digits, versus its previous expectations of mid-single-digit gains, reflecting a stronger-than-expected performance at Victoria’s Secret and, to a lesser extent, Bath & Body Works.

On average, specialty store stocks tracked by WWD retreated 1.1 percent.

There was good news to be found in the department store channel as well, which is traditionally much less volatile. Taken together, those stocks tracked by WWD dipped just 1 percent, and J.C. Penney & Co. bucked the larger trend. Generally a low-risk, relatively stable stock, Penney’s shares swam against the current Monday to gain 1.2 percent, or 39 cents, to close at $33.97.

Mass merchants and off-price retailers collectively fared worse, with the average share dropping 1.5 percent. Wal-Mart Stores Inc. declined 0.9 percent, or 50 cents, to close at $58.10, while Target Corp. dipped 1.1 percent, or 51 cents, to settle in at $44.22. Stein Mart Inc., which has been among the most improved stocks over the last 12 months, suffered the biggest drop-off in the channel, closing at $12.63, down 42 cents, or 3.2 percent.

Noteworthy is that retail issues are early cycle stocks, meaning there is still a lot of momentum in the segment. Eventually, investors will return to pegging their trading decisions on more macro- and microeconomic news.

— With contributions from Ross Tucker and Jennifer Weitzman

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