Wall St down as US retail sales disappoint

Trader Gregory Rowe, left, and specialist Peter Giacchi work on the floor of the New York Stock Exchange. Photo / AP

Wall Street fell as US retail sales declined for a third straight month, while the International Monetary Fund reduced its forecasts for worldwide growth.

The global economy will expand 3.9 per cent next year, which is down from the 4.1 per cent pace it predicted in April, the IMF said in its latest World Economic Outlook. It kept its forecast for 2012 growth at 3.5 per cent.

The fund forecast that Spain's economy will contract 0.6 per cent next year, compared with its previous estimate for 0.1 per cent growth. And the euro zone problems pose the biggest threat, the IMF said.

"Downside risks to this weaker global outlook continue to loom large," according to the IMF. "The most immediate risk is still that delayed or insufficient policy action will further escalate the euro area crisis."

Data today showed another clear sign of trouble in the world's largest economy as US retail sales dropped 0.5 per cent in June, posting the longest run of monthly consecutive declines since 2008.

"This is another example of how broader economic uncertainty is having an impact on economic activity," Eric Fine, managing director of Van Eck G-175 strategies in New York, told Reuters.

The IMF kept its estimate for the US pace of expansion at 2 per cent this year and 2.3 per cent in 2013, as forecast July 3.

Among results released today were those of Citigroup. Shares of the third-largest US bank gained more than 1 per cent after its second-quarter profit surpassed expectations.

In late afternoon trading in New York, the Dow Jones Industrial Average fell 0.24 per cent¸ the Standard & Poor's 500 Index slipped 0.11 per cent, and the Nasdaq Composite Index shed 0.26 per cent.

Among stocks gaining was Human Genome Sciences as GlaxoSmithKline agreed to acquire its long-time partner after a sweetened offer of US$3 billion. Shares of Human Genome rose more than 4 per cent.

In another healthcare deal, private equity firm TPG said it would buy US-based Par Pharmaceutical for US$1.9 billion. Par shares soared more than 36 per cent.

In Europe the Stoxx 600 Index ended the day with a 0.2 per cent gain for the session.

Euro zone inflation data, holding steady at 2.4 per cent in June, underpinned the appeal of German bunds.

Germany's two-year yield fell one basis point to minus 0.055 per cent after earlier declining to a record-low minus 0.06 per cent, according to Bloomberg, while the three-year yield dropped as low as minus 0.022 per cent, and the five-year rate hit a record low 0.27 per cent.

"The general economic backdrop is poor, so people can't get too excited about the periphery," Eric Wand, a fixed-income strategist at Lloyds Banking Group in London, told Bloomberg News. "General risk sentiment is keeping the core underpinned and investors are looking to rotate through the core and semi-core to find yield."