May 10, 2002 4 min read

By Lisa Singhania AP Business Writer

NEW YORK (AP) – Wall Street’s hopes of a recovery fizzled Thursday after mixed retail reports persuaded investors to play it safe and cash in their gains from the huge rally a day earlier.

Stocks fell sharply, although the major indexes preserved more than half of Wednesday’s significant gains. A retreat after a big advance is not unusual, but analysts said the declines were a reminder that buyers still don’t have enough faith in the business recovery to think that bidding stock prices higher will pay off.

“By and large, this bull is looking like a one-trick pony,” said Bryan Piskoroswki, market commentator at Prudential Securities. “We didn’t give it all back, but sustainability and follow-through are still big problems for this market.”

The Dow Jones industrial average closed down 104.41, or 1.0 percent, at 10,037.42, according to preliminary calculations, pulling back from its 305-point gain Wednesday.

Broader stock indicators also fell back. The Nasdaq composite index lost 45.80, or 2.7 percent, to 1,650.49. The Standard & Poor’s 500 index was down 15.84, or 1.5 percent, at 1,073.01. On Wednesday, the Nasdaq soared 122 points, while the S&P gained 39.

A slew of mostly unimpressive retail sales reports started the session on a negative note. Consumer spending accounts for two-thirds of the economy, and retail sales are considered one indicator of its strength.

Wal-Mart fell $1.40 to $54.99 and Target lost $2.29 to $42.03 after reporting weaker-than-expected April sales at stores open at least a year. But the Gap rose $1.08 to $15.79 on a smaller-than-expected sales decrease.

“This type of news preys upon people’s concern that the consumer side of the economy could be at risk,” said Tom Galvin, chief investment officer at Credit Suisse First Boston.

Reports of anthrax in the mail at the Federal Reserve also unnerved the market, although stocks had been falling before the news. Authorities said more tests would have to be done to confirm the finding.

Tech stocks fell as investors collected gains from Wednesday’s trading. Cisco Systems, whose stronger-than-expected profits triggered the rally, was down 52 cents at $15.75 – cutting into its 24 percent gain Wednesday.

Brokerage firms, which had risen on speculation that the state of New York and Merrill Lynch would soon settle an alleged conflict-of-interest case, were weak. Merrill Lynch fell $1.04 to $42.91. The stock was also hurt by UBS Warburg’s decision to reduce its forecast for the brokerage, citing weak merger-and-acquisitions activity.

Profit-taking usually follows big run-ups, but analysts said investors Thursday were continuing their pattern of refusing to commit too much until companies become more confident about future business. Disappointing first-quarter results and most companies’ inability to predict stronger quarters ahead have given investors more reasons to sell than buy.

Although Cisco’s news was enough to start a rally Wednesday, analysts said it will take more than one company to alleviate investors’ fears. They note that the gains were really more of a rebound since stocks have fallen so much.

“It’s constructive that we haven’t fully reversed all the moves from Wednesday, but confidence generally remains shattered in the market,” Galvin said. “I think we really need to get data on the job picture, better profits and the stability in consumer spending and less global tension before investors really start to commit again.”

The Nasdaq has fallen 15.4 percent from where it started 2002; the S&P is off 6.5 percent and the Dow is up 0.2 percent.

Declining issues led advancers 3 to 2 on the New York Stock Exchange. Volume came to 1.14 billion shares, well below the 1.5 billion shares reported Wednesday.

The Russell 2000 index fell 8.36, or 1.6 percent, to 501.39.

Overseas, Japan’s Nikkei stock average rose almost 1.0 percent. In Europe, Germany’s DAX index fell 1.2 percent, Britain’s FTSE 100 dropped 0.2 percent, and France’s CAC-40 lost 0.4 percent.

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