U.S. Stocks Drop as Retail Sales Slump Spurs Consumer Concern

Nov. 14 (Bloomberg) — U.S. stocks fell, extending a second straight weekly loss, as a record drop in retail sales and weaker demand for mobile phones heightened concern the recession will deepen.

Sears Holdings Corp., Office Depot Inc. and Chevron Corp. slid more than 3.7 percent on government data showing sales at retailers declined 2.8 percent last month and filling station purchases slid 13 percent. Qualcomm Inc., the biggest maker of mobile-phone chips, and Motorola Inc. lost more than 5 percent as Nokia Oyj said the recession has damaged consumer spending. The Standard & Poor’s 500 Index pared yesterday’s 6.9 percent rally and extended its weekly tumble to more than 4 percent.

“The retailers are just confirming what everybody already knows; the economy is in bad shape, people are not spending,” said Malcolm Polley, president of Stewart Capital Advisors in Indiana, Pennsylvania, which manages $1 billion. “We have too many retailers and some of them will go away.”

The S&P 500 lost 23.25 points, or 2.6 percent, to 888.04 at 10:21 a.m. in New York. The Dow Jones Industrial Average decreased 170.36, or 1.9 percent, to 8,664.89. The Nasdaq Composite Index slipped 3.1 percent to 1,546.6. Ten stocks fell for each that rose on the New York Stock Exchange.

39 Percent Slump

The S&P 500 has slumped 39 percent in 2008 as credit- related losses and writedowns at banks, brokerages and insurers worldwide topped $950 billion in the worst financial crisis since the Great Depression.

The S&P 500 jumped the most in two weeks yesterday, including a 6 percent rally in the final hour of trading, as investors snapped up the cheapest energy shares on record and real-estate companies gained after CB Richard Ellis Inc. raised cash in a share sale.

“You cannot read anything significant into that, that we have found a bottom and are waiting for a recovery,” said London-based Justin Urquhart Stewart, director of 7 Investment Management. “It just shows the level of nervousness and that is going to continue for some time. The background noise is going to be very poor indeed,” he told Bloomberg Television.

Sears, the largest U.S. department-store chain, tumbled 7.2 percent to $41.34. Office Depot, the second-biggest office- supplies retailer, slid 9.4 percent to $2.21.

Chevron, the second-biggest U.S. oil company, slumped 3.7 percent to $72.28 as crude declined 2.4 percent to $56.85 a barrel.

The 2.8 percent decrease in retail sales was the fourth consecutive drop and the biggest since records began in 1992, the Commerce Department said. Purchases excluding automobiles also posted their worst performance.

`Halt in October’

“It reminds everyone how difficult the current environment is,” Mark Freeman, a money manager at Westwood Management Corp. in Dallas, which oversees $7 billion, said of the data and lowered forecasts from some chain stores. “How many retailers do you need to tell you things came to a halt in October and early November?’

Qualcomm slid 5.8 percent to $32.79, while Motorola lost 5.2 percent to $4.34. Nokia said industrywide handset sales will be lower this year than previously anticipated, forcing the company to deepen cost cuts as consumers hesitate to buy new models. Global shipments will be about 1.24 billion this year, down from a previous prediction of 1.26 billion phones, and will shrink next year, Nokia said in a statement today.

Earnings at companies in the S&P 500 that have reported third-quarter results dropped 17 percent on average, according to Bloomberg data. Companies from Best Buy Co. to Intel Corp. have cut forecasts this week. Analysts expect an 8.5 percent decline in full-year profits, estimates compiled by Bloomberg show.

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