Wall Street wiped Tuesday's gains off the slate yesterday after the government reported a paltry increase in retail sales and traders reconsidered the reasoning behind Tuesday's rally.
Retail sales grew just 0.3 percent in March, the Commerce Department calculated. Factoring out automobile sales -- which vary erratically from month to month -- sales increased by a negligible 0.1 percent.
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Statistically, higher gasoline prices boost retail sales because consumers spend more at the pump. But the money spent at gas station drains family budgets of cash that otherwise might be spent at Wal-Mart, the supermarket or other merchants.
The latest company to report negative fallout from softening consumer spending is motorcycle maker Harley-Davidson Inc., which yesterday reported that U.S. sales of Fat Boy, Road King and other motorcycle models fell about 1 percent. Harley-Davidson stock dropped almost 17 percent -- down $9.84, to $48.93 -- after the company cut forecasts for sales and profit for the rest of the year.
Shares of General Motors Corp., Ford Motor Co. and DaimlerChrysler AG also fell, as their sales were eroded by high-priced gasoline.
Though the decline has yet to flow through to prices at the pump, gasoline and crude oil prices have fallen sharply in the past couple of weeks and fell further yesterday. Crude oil futures dropped $1.64, to $50.22 a barrel -- the lowest in seven weeks -- but any benefit to stock prices was overwhelmed by the day's other developments.
After staging a rally Tuesday, stocks opened slightly lower following release of the retail sales report and began to plunge after lunch.
The Dow Jones industrial average fell 104.04 points, to 10,403.93, the Dow's lowest level since mid-January. The Nasdaq composite index dropped 13.97 points, to 1173.79. The Standard & Poor's 500-stock index declined 31.03 points, to 1974.37.
Stocks closed almost 60 points higher on Tuesday after a mid-afternoon rally set off by the release of details of Federal Reserve deliberations on interest rates. Traders interpreted the minutes of the latest Fed meeting to mean there was no danger the Fed would boost rates by half a percentage point, as some on Wall Street had feared.
But analysts who studied the Fed minutes overnight pointed out that that was about the only good news to be gleaned from them. In fact, the talk at the meeting suggested interest rates could be boosted even higher than had previously been projected.
The New York Stock Exchange composite index fell 74.05, to 7133.99; the American Stock Exchange index fell 8.15, to 1458.50; and the Russell 2000 index of smaller-company stocks fell 10.49, to 602.54.
Declining issues outnumbered advancing ones by 7 to 3 on the NYSE, where trading volume rose to 1.63 billion shares, from 1.58 billion on Tuesday. On the Nasdaq Stock Market, decliners outnumbered advancers by 5 to 2 and volume totaled 1.72 billion, down from 1.92 billion.
The price of the Treasury's 10-year note fell 63 cents per $1,000 invested, and its yield remained at 4.36 percent.
The dollar fell against the Japanese yen and the euro. In late New York trading, a dollar bought 107.37 yen, down from 108.24 late Tuesday, and a euro bought $1.2912, up from $1.2880.
Gold for current delivery rose to $429.30 a troy ounce, from $427.60 on Tuesday, on the New York Mercantile Exchange's Commodity Exchange.