Stocks decline as jitters about retail return

NEW YORK -- Wall Street's worries about weak consumer spending revived today, sending stocks lower as bad news from Wal-Mart Stores Inc. signaled that even the stronger U.S. retailers struggled during the holiday shopping season. The Dow Jones industrial average fell 100 points.

But investors did take some heart from a speech by President-elect Barack Obama in which he repeated his call for Congress to pump unprecedented dollars into the economy.

The nation's largest retailer said December sales at stores open for at least a year rose by 1.2 percent, including fuel, which was worse than analysts expected. Wal-Mart also slashed its forecast for fourth-quarter earnings, and its shares fell more than 7 percent.

"This news out of Wal-Mart has taken a lot of people by surprise," said Craig Peckham, market strategist at Jefferies & Co. The discount retailer has been viewed as having a good business model in a tough economy, he said.

Beyond Wal-Mart, the poor numbers from most retailers weren't a surprise after industry analysts had warned following Christmas that the season had turned out badly. But Wall Street became unnerved when a company like Wal-Mart cut its forecast. Normally, discounters are expected to fare better in tough economies because they can attract customers whose chief concern is low prices. So trouble at discount stores underscores the overall difficulties facing consumers.

Some investors had been prepared for terrible numbers from an array of retailers, said Bill Groenveld, head trader for vFinance Investments. He contends these investors are starting to back away during market selloffs and then returning to pick up the pieces.

"Instead of people selling into the rallies they're starting to buy into the dips," he said of the market's shift away from the panic that dominated trading in the fall.

In midday trading, the Dow fell 101.55, or 1.16 percent, to 8,668.15.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 6.54, or 0.72 percent, to 900.11, and the Nasdaq composite index fell 4.93, or 0.31 percent, to 1,594.13.

The Russell 2000 index of smaller companies fell 0.41, or 0.08 percent, to 496.69.

Declining issues narrowly outpaced advancers on the New York Stock Exchange, where volume came to 425.7 million shares.