Wall St drops on JC Penney's warning, bank worries
NEW YORK (Reuters) - Stocks fell on Friday as a profit warning from J.C. Penney raised concerns about slowing consumer spending while persistent worries about credit-related problems throttled financial stocks.
J.C. Penney Co Inc shares fell 7.5 percent after disappointing Easter sales forced the department store operator to cut its quarterly outlook and raised concerns about how retailers would fare as the economy lags.
Financial shares also sagged after a prominent analyst warned of more dividend cuts and forecast a further 25 percent drop in banking shares.
The S&P index of financial stocks slipped 2 percent, with Citigroup Inc among the top drags on the S&P 500, while American Express was the heaviest weight on the Dow.
J.C. Penney was "significantly worse than expected, and maybe people are saying it's even worse out there than we thought," said Rick Campagna, portfolio manager at Provident Investment Council in Pasadena, California, while noting that the day's trading volume was light, which makes market reactions more severe.
The Dow Jones industrial average fell 86.06 points, or 0.70 percent, to end at 12,216.40. The Standard & Poor's 500 Index slid 10.54 points, or 0.80 percent, to finish at 1,315.22. The Nasdaq Composite Index dropped 19.65 points, or 0.86 percent, to close at 2,261.18.
For the week, the Dow was down 1.2 percent and the S&P was down 1.1 percent, while the Nasdaq was up 0.1 percent.
Shares of J.C. Penney fell to $37.48 after the department store operator's forecast and comments that the environment remains will remain tough throughout 2008. That weighed on other retailers, including Kohl's Corp, down 4.9 percent at $42.33, and Macy's Inc, down 6 percent at $21.97.
Hitting the financial sector was a research note from Oppenheimer & Co analyst Meredith Whitney saying that earnings will not support current dividend payouts in 2008 at Citigroup, Wachovia Corp and other U.S. banks.
Also, Credit Suisse said it expects Citigroup to post a first-quarter loss.
Shares of Citigroup fell 4.4 percent to $20.83 and American Express declined 3.8 percent to $43.15, while shares of Wachovia dropped 4 percent to $25.99. All trade on the NYSE.
Overseas, shareholders of Swiss bank UBS were gearing up for a possible vote on another capital injection, as markets see it as likely the bank may need to take further credit write-downs.
On the Nasdaq, shares of for-profit education company Apollo Group Inc. sank 26.9 percent to $41.21 and hit their lowest price since January 2007, a day after reporting worse-than-expected second-quarter results. The stock ranked second among the Nasdaq's biggest percentage losers. It traded as low as $39.41.
Helping stocks earlier in the session was data showing a key inflation gauge reflected only a small increase in prices.
Government data showed year-on-year inflation, as recorded by the core personal consumption expenditures price index, tapered off last month. Investors have been concerned about the impact of inflation rising even as the economy deteriorates. Continued...
