Stocks fall as investors worry about holiday sales at retailers; dollar pares losses

By Tim Paradis, AP
Monday, November 30, 2009

Stocks fall as investors worry about consumers

NEW YORK — Nagging worries about the strength of the holiday shopping season weighed on stocks Monday, sending them modestly lower.

Retailers were among the day’s losers after Thanksgiving weekend sales met expectations but failed to reassure investors who are questioning whether consumers will spend enough to boost the economy. Meanwhile, the dollar pared its losses against other major currencies, which sent the prices of some commodities, and stocks of the companies that produce them down moderately.

Despite Monday’s slip, stocks were ending the month of November with big gains. Major stock indexes are up more than 5 percent, the best monthly performance since July.

Investors, satisfied for the moment that credit problems in the Middle Eastern city-state of Dubai weren’t a sign of spreading troubles, turned their attention to consumers, whose spending is the biggest driver of the U.S. economy. Preliminary figures by ShopperTrak, a research firm that tracks more than 50,000 outlets, showed that sales rose 0.5 percent on Friday, the start to the holiday shopping season. Online sales jumped 11 percent Thursday and Friday, according to comScore, an Internet research firm.

Investors have been worried that rising unemployment would make shoppers uncomfortable about spending during the holidays. Traders are already looking to the government’s November unemployment report, which is due Friday.

The National Retail Federation, a trade group, said Sunday it still expects holiday sales to slip 1 percent compared with last year.

Benny Lorenzo, CEO of the investment bank Kaufman Bros. in New York, said the retail numbers might not look as impressive because there were so many markdowns and clearance sales last year. He said investors are cautious about the results but pointed to Internet retailers as one area of strength.

“Certainly in a market like this it could’ve been a lot worse for sure,” he said. “The online vendors, they seem to have done pretty well.”

In midafternoon trading, the Dow Jones industrial average fell 8.39, or 0.1 percent, to 10,301.53. The broader Standard & Poor’s 500 index fell 1.39, or 0.1 percent, to 1,090.10, and the Nasdaq composite index fell 5.97, or 0.3 percent, to 2,132.47.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was flat at 3.21 percent from late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.06 percent from 0.01 percent.

The dollar fell against other major currencies, while gold rose.

The stock market’s modest moves came after stocks tumbled Friday on concern about Dubai’s debt problems. The Dow ended with a loss of 155 points after being down more than 200 in the early going.

Investors were initially anxious about the possibility that a debt default by Dubai could touch off a new round of lending problems even as credit markets are still recovering from last year’s near-shutdown following the collapse of Lehman Brothers.

However, it appeared U.S. investors hold little of Dubai’s debt, which has eased some concerns. The United Arab Emirates, where Dubai is located, also said Sunday it will make extra funding available to all banks in the country, including foreign banks with local offices.

Rob Lutts, president and chief investment officer of Cabot Money Management, said that while some investments will be lost in Dubai, global stock markets are accounting for the potential losses.

“We’ve seen the impact,” he said, pointing to the drops last week. “I think that issue is known now.”

The broader worry is that banks and other lenders would cut back financing to other emerging markets because of fears of default, Lutts said.

The market drew some support from an improvement at factories. The Chicago Purchasing Managers index, which measures Midwestern manufacturing, rose to 56.1 in November from 54.2 in October. New orders rose and employment improved, while production expansion slowed.

Among retailers, Macy’s Inc. slid 95 cents, or 5.6 percent, to $16.02, while Target Corp. fell $1.49, or 3.1 percent, to $46.22.

Online retailers advanced. Inc. rose $2.73, or 2.1 percent, to $134.47, while eBay Inc. advanced 94 cents, or 4.1 percent, to $24.16.

Most financial stocks rose ease fear about Dubai eased but American International Group Inc. tumbled after a Sanford Bernstein analyst reportedly said the embattled insurer doesn’t have enough reserves to pay some potential claims. Todd Bault, an analyst from Sanford Bernstein, said AIG is facing an $11 billion shortfall to cover potential claims in its property and casualty insurance business, according to CNBC.

An AIG spokeswoman declined to comment on the report. The stock fell $4.54, or 13.6 percent, to $28.76.

Light, sweet crude rose $1.81 to $77.86 per barrel on the New York Mercantile Exchange.

Four stocks fell for every three that rose on the New York Stock Exchange, where volume came to 572 million shares.

Overseas, Britain’s FTSE 100, Germany’s DAX and France’s CAC-40 each lost 1.1 percent. Japan’s Nikkei stock average rose 2.9 percent.

will not be displayed