MARKET REPORT

Stocks slide on slow Christmas sales

— U.S. stocks fell Wednesday for the third trading day in a row. Disappointing holiday sales weighed heavily on retail companies, and the unwelcome “fiscal cliff” package of higher taxes and lower government spending loomed nearer.

The Dow Jones industrial average slipped 24.49 points to 13,114.59. The Standard & Poor’s 500 index fell 6.83 to 1,419.83 and the Nasdaq composite lost 22.44 to 2,990.16.

Karyn Cavanaugh, market strategist with ING Investment Management in New York, wrote a note to clients Wednesday highlighting the less-than-merry retail sales.

“I hope that they’re reading this from the mall,” she said later, “because retail sales could use a boost.”

Plodding retail sales are a concern because consumer spending accounts for roughly 70 percent of the U.S. economy. When shoppers pull back on spending, that can take a chunk out of company earnings, which in turn pushes down the stock market.

The retail numbers are also a sign that despite scattered hints of an improving economy, including a report Wednesday about rising home prices, many consumers remain uneasy about their prospects.

Major U.S. retailers including Abercrombie & Fitch, Sears Holdings, Urban Outfitters, Limited Brands, Nike and Gap were all down. Handbag maker Coach, a bellwether of the luxury market, plummeted $3.39 to $54.13. It lost nearly 6 percent of its value, more than any other company in the S&P 500.

“Consumers just aren’t confident,” said Jeff Sica, president and chief investment officer of SICA Wealth Management in Morristown, N.J. “They don’t feel a sense of security that they’re going to be able to maintain their job or their income or their savings.”

Sica pointed out that normally the market rises at this time of year - the so-called Santa Claus rally. Since 1969, stocks have risen an average of 1.6 percent over the last five days of December and the first two of January, according to The Stock Trader’s Almanac.

This year, it seems, the retail sales and “fiscal cliff”have been too much of an overhang.

The “fiscal cliff” refers to lower government spending and higher taxes that will kick in Tuesday, if Republicans and Democrats can’t agree to a new budget by then.

The yield on the benchmark 10-year Treasury note edged down to 1.75 percent from 1.77 percent Monday, a sign that investors were taking money out of stocks and putting it into bonds.

It was the first trading day after the Christmas holiday. Trading volume was low, and European markets were still closed.

Just 2.3 billion shares were traded on the New York Stock Exchange. For the year so far, the average has been around 3.6 billion.

Business, Pages 22 on 12/27/2012

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