US stocks fell on Friday as a profit warning from J.C. Penney raised concerns about slowing consumer spending while persistent worries about credit-related problems throttled financial stocks. J.C. Penney Co Inc shares fell 7.5 percent after dissapointing Easter sales forced the department store operator to cut its quarterly outlook and raised concerns about how retailers would fare as the economy lags.
Financial shares also sagged after a prominent analyst warned of more dividend cuts and forecast a further 25 percent drop in banking shares. The S&P index of financial stocks slipped 2 percent, with Citigroup Inc among the top drags on the S&P 500, while American Express was the heaviest weight on the Dow.
J.C. Penney was "significantly worse than expected, and maybe people are saying it's even worse out there than we thought," said Rick Campagna, portfolio manager at Provident Investment Council in Pasadena, California, while noting that the day's trading volume was light, which makes market reactions more severe.
The Dow Jones industrial average fell 86.06 points, or 0.70 percent, to end at 12,216.40. The Standard & Poor's 500 Index slid 10.54 points, or 0.80 percent, to finish at 1,315.22. The Nasdaq Composite Index dropped 19.65 points, or 0.86 percent, to close at 2,261.18.
For the week, the Dow was down 1.2 percent and the S&P was down 1.1 percent, while the Nasdaq was up 0.1 percent. Shares of J.C. Penney fell to $37.48 after the department store operator's forecast and comments that the environment remains will remain tough throughout 2008. That weighed on other retailers, including Kohl's Corp, down 4.9 percent at $42.33, and Macy's Inc, down 6 percent at $21.97.
Hitting the financial sector was a research note from Oppenheimer & Co analyst Meredith Whitney saying that earnings will not support current dividend payouts in 2008 at Citigroup, Wachovia Corp and other US banks.
Also, Credit Suisse said it expects Citigroup to post a first-quarter loss. Shares of Citigroup fell 4.4 percent to $20.83 and American Express declined 3.8 percent to $43.15, while shares of Wachovia dropped 4 percent to $25.99. All trade on the NYSE.
Overseas, shareholders of Swiss bank UBS were gearing up for a possible vote on another capital injection, as markets see it as likely the bank may need to take further credit write-downs. On the Nasdaq, shares of for-profit education company Apollo Group Inc sank 26.9 percent to $41.21 and hit their lowest price since January 2007, a day after reporting worse-than-expected second-quarter results. The stock ranked second among the Nasdaq's biggest percentage losers. It traded as low as $39.41. Helping stocks earlier in the session was data showing a key inflation gauge reflected only a small increase in prices.
Government data showed year-on-year inflation, as recorded by the core personal consumption expenditures price index, tapered off last month. Investors have been concerned about the impact of inflation rising even as the economy deteriorates.
Stocks on the plus side included Apple, which rose 2 percent to $143.01. A Bank of America research report said Apple is expected to launch a high-speed wireless version of the iPhone in the second quarter, and produce as many as 8 million of the devices in the third quarter. AT&T Inc, the exclusive US carrier for the iPhone and a Dow component, was unchanged at $37.66.
On the New York Stock Exchange, only 1.35 billion shares changed hands, far below last year's estimated daily average of 1.90 billion. On the Nasdaq, about 1.79 billion shares traded, below last year's daily average of 2.17 billion. Decliners outnumbered advancers by a ratio of 2 to 1 on both the NYSE and the Nasdaq.
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