By Chris Dieterich
U.S. stocks fell to session lows on Thursday after lackluster
U.S. economic reports combined with concerns about rising oil
prices.
The Dow Jones Industrial Average dropped 109 points, or 0.7%, to
16733, near the session low in mid-afternoon trading.
The S&P 500 index fell 15 points, or 0.8%, to 1929 and the
Nasdaq Composite Index lost 34 points, or 0.5%, to 4297.
Energy was the lone sector in the S&P 500 to notch gains as
increased violence in Iraq sparked a surge in oil prices. Crude-oil
futures rallied 1.5% to $106.00 a barrel, a level not seen since
last year.
Shares of fuel-price-sensitive airline stocks fell sharply, with
the NYSE Arca Airline Index slumping 3.4%. Delta Air Lines was the
worst performer on the S&P 500, down 5.9%, while Southwest
Airlines fell 5.2%.
Stocks moved steadily lower as a string of news reports showed
that Iraq is moving closer to an all-out sectarian conflict.
"The headlines make people a little bit nervous, but we're not
seeing anything that would resemble a panic," said Ian Winer,
director of equity trading at Wedbush Securities.
Stocks started their decline on Wednesday following
four-straight record highs for the Dow. The benchmark's 102-point
drop was its biggest one-day skid in over three weeks. Traders
blamed a confluence of political and economic concerns. The World
Bank cut its 2014 global growth target and key House Republican
suffered a surprise defeat.
On Thursday, economic reports did little to rekindle investor
enthusiasm. Retail sales for May increased 0.3% from the previous
month, short of expectations for a 0.7% rise. Excluding autos,
sales grew 0.1%, versus forecasts of 0.4% growth. Separately,
initial claims for jobless benefits edged up 4,000 to 317,000 in
the latest week, topping estimates of 310,000.
"It's been a slow recovery with fits and starts," said Lawrence
Creatura, a small-cap fund portfolio manager at Federated
Investors, which oversees $366 billion. Still, Mr. Creatura has
been buying shares of retail and energy companies on the view that
the outlook for growth is steadily improving.
Paul Nolte, portfolio manager at Chicago's Kingsview Asset
Management, wasn't making any portfolio changes this week based on
political and economic developments. He said the U.S. economy is on
the upswing and that the Federal Reserve remains committed to its
low interest rate policy even as it dials back monthly stimulus
efforts.
"It has been a little harder to put money to work because
valuations are stretched," he said. A pullback from all-time highs
would present "an opportunity to add to some of our holdings," he
said, specifically in energy shares.
The yield on the 10-year Treasury note slipped to 2.582%, after
settling at a one-month high of 2.642% late Wednesday. Gold futures
gained 1% to $1,273.60 a troy ounce. The dollar slipped against the
yen and the euro.
The Stoxx Europe 600 gained less than 0.1%. Industrial
production in the euro zone increased more than expected in
April.
Asian markets were mostly lower. Japan's Nikkei Stock Average
fell 0.6% and China's Shanghai Composite lost 0.2%.
In corporate news, Lululemon Athletica slid 16% after the yoga
gear maker provided a fiscal-second-quarter earnings and revenue
outlook that was below current analyst projections and lowered its
full-year outlook. The company also said its chief financial
officer, John Currie, plans to retire at the end of the fiscal
year. Lululemon unveiled a $450 million stock buyback program.
Dow component Intel slipped 0.3% after the European Union upheld
its fine of about $1.43 billion against the semiconductor firm for
abusing its dominant position in the microprocessor market.
Restoration Hardware rallied 13% after the home-furnishings
retailer reported late Wednesday fiscal-first-quarter adjusted
earnings and revenue that rose above analyst estimates and raised
its full-year outlook.
Write to Chris Dieterich at christopher.dieterich@wsj.com