Stocks declined for a third straight session Thursday as retail sales fell short of expectations and worries about the European debt crisis nagged at the market.
Market sentiment turned negative very quickly in recent session, Steve Starker, co-founder of BTIG, which specializes in institutional trading, said on CNBC this morning.
The market "may have a little bit more room on the upside," Starker said, but even if Friday's jobs report beats expectations, "every rally seems fadable right now," he said.
Financials, consumer discretionary and industrials were the biggest declining sectors.
The Dow was down more than 100 points midmorning, led by GE and Caterpillar.
Financials were mostly lower this morning after the Senate approved an amendment to the financial-reform bill that would end "too big to fail." The measure calls for setting up a government protocol for seizing and dismantling large firms that are in distress.
Though shares of Citigroup advanced.
The Financial Crisis Inquiry Commission is back in session today. Star witnesses include former Treasury Secretary Henry Paulson and current Treasury Secretary Tim Geithner.
Elsewhere in the financial sector, Freddie Mac will ask for $10.6 billion more in federal aid after posting a nearly $8 billion loss in its latest quarter.
The European Central Bank opted to keep interest rates unchanged, which came as a disappointment to the market as many had hoped that the central bank would take some action to stem the current crisis. The market also didn't like that ECB president Jean-Claude Trichet used the "u" word — uncertainty.
"We expect the euro area economy to expand at a moderate pace in 2010, but growth patterns could be uneven in an environment of high uncertainty," Trichet said.
While debt worries spread to what seems like a new European country each day — Greece, Spain, Portugal — Standard & Poor's reiterated that their outlook for Italy is stable.
In today's economic news, jobless claims dropped to 444,000last week, while productivity rose 3.6 percent in the first quarter.
The Dow and the S&P 500 have suffered their biggest two-day declines since Feb. 3-4, while the Nasdaq saw its biggest two-day decline since August of 2009 on Tuesday and Wednesday. Market gains for the year have been cut to about 4 percent across the board.
April sales reports from major retailers were mostly disappointing, including reports from Costco and Gap.
Teen chains reported sales declines that were worst than expected, while upscale department store Nordstrom reported a sales gain that topped expectations.
"The low interest-rate environment in the United States is pushing up the U.S. stock market and that should be very good for the retail luxury segment of the market," Patrick Dunkerley of the Scout Mid-Cap Fund said on CNBC this morning. "We think investor should be kicking the tires on stocks like Coach, Tiffany and Macy's" and other purveyors of luxury goods for buying opportunities, he said.
Joseph Feldman of Telsey Advisory Group added that overall discretionary trends are encouraging, with Target missing on its headline sales number but reporting improved sales of discretionary items like clothing. He also likes Home Depot, Lowe's, Bed Bath & Beyond and Williams-Sonoma.
Walmart doesn't report with the rest of the retailers. In its annual report to shareholders a few weeks ago, the discount giant reported sales rose just 1 percent in fiscal 2010, its worst gain on record. Walmart will hold its annual meeting on June 4. Investors will be looking to see what measures Walmart is taking to help juice sales and retain higher-income customers that flocked to the stores for the first time during the recession.
No major earnings reports came out this morning. After the bell today, Kraft Foods will report. Analysts expect to see 45 cents a share, unchanged from a year earlier.
Still to Come:
THURSDAY: Bernanke speaks; earnings from Activision, Kraft
FRIDAY: Goldman Sachs shareholders meeting; April jobs report; Fed's Plosser speaks; consumer credit; earnings from Liberty Media
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