Stocks Decline amid Reports of Increased Consumer Spending
NEW YORK (AP) -- Stocks dropped sharply in the final hour of trading Tuesday as a report pointing to a pickup in consumer spending this month stirred up inflation fears and sent interest rates rising once more in the bond market.
The Dow Jones industrial average, at one point up 33 points, fell 101.27 to 7,960.84, its first close below 8,000 since July 21.Broad- market indexes also were lower.
The Dow now has tumbled almost 300 points, or 3.6 percent, since hitting a record 8,259.31 last Wednesday. The change in fortunes has come as yields on 30-year Treasury bonds -- a benchmark for consumer and business borrowing costs -- have climbed from a 17-month low of 6.29 percent on July 31. Long- term yields rose to 6.67 percent Tuesday from 6.63 percent late Monday. Bonds fell after a midafternoon private report that said national retail sales rose 0.9 percent in the first week of August compared with July. The data, from LJR Redbook Research, raised worries that important government reports due later this week on inflation at the wholesale and consumer levels would show that prices are on the rebound. Traders are worried that if the economy is too strong, the Federal Reserve's inflation fighters will try to cool it off by raising interest rates. Fed policy-makers meet next Tuesday. Rising rates slow down consumer spending while adding to business expenses and making returns on stocks less attractive. Further indications of the economy's condition are due Wednesday, when the government provides July figures on retail sales and wholesale prices. But not everyone has the inflation jitters. Cliff Waldman, an economist for the National Federation of Independent Business, said surveys of his members show consistently that small businesses, which make up 40 percent of the economy, have not raised prices, nor do they intend to in the near future. "Prices are not only stable, they're trending downward in the past couple of years," Waldman said. "Price plans give no indication that that is going to reverse direction." Ricky Harrington, a technical analyst at Interstate Johnson Lane in Charlotte, N.C., said that while the LJR Redbook report was a catalyst for the assault on bonds Tuesday afternoon, the stock market had been looking for an excuse to sell off of from the lofty levels it had reached earlier. …