Stocks slide as Gap Inc. plunges, retailers flail
NEW YORK — Stocks slid Friday on signs that U.S. consumer demand may be weakening and fears about the Greek debt crisis.
The Dow Jones industrial average fell 78 points, or 0.6 percent, to 12,527 in afternoon trading.
The Standard & Poor's 500 index fell 9, or 0.7 percent, to 1,334. The Nasdaq composite fell 22, or 0.8 percent, to 2,801.
Gap Inc. plunged 17 percent after reporting late Thursday that its costs for raw materials rose faster than expected, hurting its quarterly profit. The national clothing chain also cut its forecast for what it would earn in the full year.
Gap's sales have been sluggish, a worrying sign for investors who are counting on shoppers to lead a recovery in consumer spending. Gap's results pushed down other clothing companies who have been hit hard by the rising price of cotton and shoppers who are reluctant to splurge. Four of the five worst-performing stocks in the S&P 500 Friday were retailers. Urban Outfitters Inc. fell 5 percent. Ralph Lauren Corp., Limited Brands Inc., and VF Corp. also fell.
Other retailers have also been struggling. On Thursday Big Lots Inc. fell 9 percent after news reports that it had decided not to sell itself to private equity firms.
One exception to the retailer gloom was Barnes & Noble Inc. The bookseller jumped 29 percent after announcing late Thursday that Liberty Media Corp. had offered to buy the company for $1 billion in cash.
A stronger U.S. dollar has also hurt stocks. The dollar rose against the Euro after the Fitch ratings agency downgraded Greece's debt three notches further into junk status, escalating worries about the European debt crisis.
In recent months, markets have fallen when the dollar rises against the euro because the stronger U.S. currency has signaled that European countries are still struggling to get their debt under control.
"A stronger dollar and a stronger U.S. market can coincide, but not when the U.S. economic data are weak," said Quincy Krosby, chief market strategist for Prudential Financial. "This has been a stronger dollar that has come because of another currency weakening, not a stronger U.S. economy."
Oil prices fell around a dollar to $98 per barrel on new signs that demand for gasoline is falling. That sent energy companies in the S&P 500 index down 1 percent. Crude has been bouncing around the upper-$90s for most of the week as the dollar fluctuated and reports on demand for oil came in mixed.
Stocks have been moving up and down within a relatively small range since a May 4 plunge triggered by a sharp drop in oil prices. The Dow fell more than 200 points in two days. After several weeks of waffling, the index is trading slightly above where it was after that two-day fall.
May is traditionally a weak month for the stock market. Traders have little to base buying and selling decisions on with earnings season officially over and economic news scarce. Trading has been relatively light.
Even as most energy stocks fell, Anadarko Petroleum Corp. jumped 5 percent on hopes that the company would owe less than expected to oil giant BP for its part in the Deepwater Horizon disaster.
BP said it would receive a $1 billion payment from MOEX, which owned a 10 percent stake in the Macondo oil well in the Gulf of Mexico. The settlement was for a smaller amount than MOEX investors feared, and suggested that Anadarko, which owned 25 percent of the well, would also pay less to BP.
BP's stock rose 4 percent on expectations that other companies will share costs related to the Gulf of Mexico oil spill.
Software company Salesforece.com Inc. rose 9 percent, the most of any stock in the S&P 500, after its first-quarter profit beat expectations.