Poor holiday sales pull US retailers' stocks lower

U.S. stocks fell Wednesday for the third trading day in a row. Disappointing holiday sales weighed heavy 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.”

The MasterCard Advisors SpendingPulse report found that sales of electronics, clothing, jewelry and home goods increased just 0.7 percent in the two months before Christmas compared with the same period last year.

That was well below the 3 to 4 percent that analysts had expected and the worst performance since 2008, when spending shrank during the depths of the Great Recession.

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 US$3.39 to US$54.13. It lost nearly 6 percent of its value, more than any other company in the S&P 500.

Right behind it was online retailer Amazon.com, which helps analysts get a read on the entire retail market. It lost nearly 4 percent, falling US$9.99 to US$248.63.

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.

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