US stocks: Market falls as consumer confidence declines

NEW YORK - US stocks slid on Friday as data showing a larger-than-expected drop in consumer confidence hurt retailers on fears that consumers may curb spending.

Federal Reserve Chairman Alan Greenspan told a symposium in Jackson Hole, Wyoming, that the central bank is increasingly focused on rising prices for assets like houses and stocks, which fuelled investors' worries that more interest-rate hikes are in the offing. That hit shares of home builders like D.R. Horton Inc. and other stocks sensitive to interest rates, such as banks and mortgage lenders.

The Standard & Poor's Retailing Index fell 0.9 per cent, with stocks like Home Depot Inc. also down almost 1 per cent. The Dow Jones US home-builders index fell 1.5 per cent to 941.13, just above a two-month low hit earlier in the day.

"Consumers are beginning to feel the impact of higher oil prices in their pockets," said Larry Peruzzi, senior equity trader at The Boston Co. Asset Management, with US$68 billion in stocks. "Less confidence means less spending and no wonder we have been seeing shares of retailers and banks faltering." The Dow Jones industrial average fell 53.34 points, or 0.51 per cent, to end at 10,397.29. The Standard & Poor's 500 index slipped 7.27 points, or 0.60 per cent, to finish at 1,205.10. And the technology-laced Nasdaq Composite Index dropped 13.60 points, or 0.64 per cent, to 2,120.77.

For the week, stocks fell. The blue-chip Dow average was down 1.5 per cent, while the broad S&P 500 was down 1.2 per cent, and the Nasdaq was down 0.7 per cent for the week.

Late in the session, stocks trimmed trimmed some of the day's losses after US crude oil futures fell more than US$1 a barrel. Oil prices retreated as dealers bet that Hurricane Katrina would miss the heart of US oil and gas production in the Gulf of Mexico.

NYMEX crude for October delivery fell US$1.36 to settle at US$66.13 a barrel.

But the mood on Wall Street remained cautious after the lower consumer sentiment reading and the Fed chairman's comments.

Home Depot, the world's biggest home improvement retailer, fell 0.9 per cent, or 37 cents, to US$39.81 and weighed on the blue-chip Dow average. Shares of rival Lowe's Cos. Inc. slid 1.6 per cent, or US$1.01, to US$63.18. Both trade on the New York Stock Exchange.

On Nasdaq, shares of home furnishings retailer Bed Bath & Beyond shed 1.7 per cent, or 73 cents, to US$41.27.

In the home construction sector, shares of D.R. Horton, the No. 1 US home builder, dropped 2.3 per cent, or 81 cents, to US$34.40. The stock of Countrywide Financial Corp., the largest US home mortgage lender, declined 0.5 per cent, or 18 cents, to US$32.93.

Boeing Co. was the biggest drag on the Dow, falling 1.3 per cent, or 90 cents, to US$66.31 a day after its machinists' union criticised the aircraft maker's initial proposal for a new contract.

The University of Michigan's consumer sentiment index for August fell to 89.1 from 96.5 in July, more than economists had expected.

Analysts said the drop in consumer sentiment shows that higher petrol prices are weighing on Americans' household budgets.

Other declining stocks sensitive to consumer spending included apparel chain Chico's FAS, sinking 8.3 per cent, or US$3.09, to US$33.98 on the NYSE.

"Chico's is a great company, and even though it did well last quarter and everything is fine, people are starting to discount a slower future," said Martin Yokosawa, senior portfolio manager at Oberweis Asset Management in Lisle, Illinois.

Since the S&P 500 hit a four-year high on Aug. 3, the broad index has fallen about 3 per cent as investors sold stocks on concerns that record oil prices and higher interest rates may hurt consumer spending and corporate earnings.

"We continue to think that sell-side earnings expectations for double-digit growth are too optimistic and that downward revisions could drag down markets," Tobias Levkovich, Citigroup Inc.'s chief US equity strategist, said in a research note this week to clients.

Trading was light on the New York Stock Exchange, where advancers beat decliners by a ratio of about 11 to 5, with about 1.18 billion shares changing hands, down from the 1.46 billion daily average for last year.

On Nasdaq, gainers outnumbered decliners by a ratio of about 7 to 3, with about 1.29 billion shares changing hands, sharply below the 1.81 billion daily average last year.

- REUTERS