NEW YORK(CNN/Money) -
Stock selling intensified by the close of trade Thursday as an unexpectedly weak retail report challenged investor hopes that a strong economic recovery can be sustained during a prolonged stock downturn.
The Dow Jones industrial average fell 114.91 to 9,502.80. The Nasdaq composite index lost 22.26 to 1,496.86. The Standard & Poor's 500 index was 10.70 lower at 1,009.56.
"What you're seeing in the broader market is people pulling back, taking a wait-and-see attitude," Stephen Murphy, associate director at Institutional Direct told CNNfn's Street Sweep. "Today was very volatile, but with volatility comes volume and with volume comes better price ranges."
May retail sales fell 0.9 percent, far more than the 0.2 percent drop economists surveyed by Briefing.com were expecting. In April, retail sales grew 1.2 percent. Excluding the auto component of the reading, May sales fell 0.4 percent.
The market's latest losses pushed the Nasdaq to its lowest levels since Sept. 27 while the Dow industrials finished at their worst point since Nov. 5.
No. 1 retailer Wal-Mart Stores, a Dow component, declined sharply. Other big Dow decliners included 3M (MMM: down $1.75 to $125.80, Research, Estimates), United Technologies (UTX: down $1.20 to $68.75, Research, Estimates), Boeing (BA: down $1.33 to $42.50, Research, Estimates) and American Express (AXP: down $1.22 to $35.92, Research, Estimates).
"The retail numbers were really weak and the markets responded," said Brian Finnerty, managing director at Melhado Flynn & Associates. "This is the kind of market where any glitch, any chink in the armor, can set us off."
In corporate news, telephone equipment maker Lucent (LU: down $0.15 to $2.80, Research, Estimates) warned that fiscal third-quarter revenue will miss expectations due to continued weakness in the sector.
The Lucent weakness spilled over into a number of other telecom and networking companies, including Cisco Systems (CSCO: down $0.40 to $14.89, Research, Estimates).
Tyco bounces up
On an upbeat note, troubled conglomerate Tyco International (TYC: up $3.65 to $13.80, Research, Estimates) received upgrades from both Merrill Lynch and J.P. Morgan. However, a published report said that the Securities and Exchange Commission has reopened a 1999 probe into Tyco's accounting and acquisition practices. On Thursday, sources told CNN that an initial public offering of its CIT Group financial services unit is set to happen in early July.
In addition, a pair of stocks offered some support to the technology sector.
Shares of Dow component and computer hardware leader IBM (IBM: up $0.95 to $75.60, Research, Estimates) rose after a pair of analysts issued positive comments. S.G. Cowen raised its 2002 and 2003 estimates on the stock, saying it looks conspicuously undervalued. UBS Warburg said that IBM's restructuring actions are eliminating businesses that have been a drag on the company's earnings outlook and that Big Blue is enhancing its competitiveness.
Chip stocks got a boost from a late-Wednesday announcement by specialty semiconductor maker Microchip Technology (MCHP: up $0.92 to $29.49, Research, Estimates). It guided higher for its fiscal first quarter, saying it now expects to earn 15 cents per share, a penny better than expected, on revenue that should show a rise of 14 percent from the same period one year earlier. The company cited improving market conditions in its memory chip and analog business.
But the positive catalyst was not sufficient to lift markets by the close.
"The retail news turned sentiment this morning and it just hasn't been able to really get past that," said Hedi Reynolds, head of Nasdaq trading at Morgan Keegan. "There's just no catalyst, no enthusiasm, no sense of urgency."
In the day's other economic news, the Producer Price Index, a measure of inflation at the wholesale level, declined 0.4 percent last month instead of the 0.1 percent rise economists expected; prices fell 0.2 percent in April. Excluding food and energy costs, the "core" index was unchanged.
In addition, the number of Americans filing new jobless claims rose to 390,000 from 384,000 in the previous week, below the consensus of economists and the key 400,000 level, which is seen as a symbol of a weak economy.
Treasurys rose sharply, pushing the yield on the 10-year note down to 4.90 percent.
European markets closed at new 8-month lows, while Asian markets ended lower. The dollar was weaker versus the euro and the yen. Light crude oil futures rose 98 cents to $25.85.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by more than 5-to-3 as nearly 1.40 billion shares changed hands. On the Nasdaq, decliners topped advancers by more than 3-to-2 as nearly 1.56 billion shares traded.