U.S. Stocks Drop on Retail, Home Price Concern; Target Falls

Dec. 26 -- U.S. stocks dropped for the first time in four days on concern slower sales at Target Corp. and the biggest drop in home prices in at least six years signal consumer spending may weaken more than previously expected.

Macy's Inc., Circuit City Stores Inc. and Dillard's Inc. led declines by all 31 retailers in the Standard & Poor's 500 Index. Merrill Lynch & Co. fell to the lowest in a month after CIBC World Markets Inc. said fourth-quarter subprime losses at the world's largest brokerage may total as much as $7 billion.

The S&P 500 decreased 3.91, or 0.3 percent, to 1,492.54 at 10:29 a.m. in New York. The Dow Jones Industrial Average lost 30.97, or 0.2 percent, to 13,518.36. The Nasdaq Composite Index slipped 5.54, or 0.2 percent, to 2,707.96. More than two stocks fell for every one that rose on the New York Stock Exchange. Asian stocks climbed and most European markets were closed.

``The consumer is feeling some pain,'' said Frederic Dickson, chief market strategist at D.A. Davidson & Co., which manages $23 billion in Lake Oswego, Oregon. ``Investors are going to be looking for a spillover effect.''

Target's report that December sales at stores open at least a year may drop 1 percent bolstered expectations that chain stores will post the weakest holiday sales growth in five years. Retailers in the S&P 500 have tumbled 17 percent as a group this year as home values decline and energy prices climb. The S&P/Case-Shiller index today showed property values slid 6.1 percent in October.

The S&P 500 is headed for its first quarterly decline since the three months ended June 2006.

Target Tumbles

Target fell $1.53 to $50.94. Target had earlier predicted a gain of as much as 5 percent for stores open at least a year.

Macy's, the owner of the namesake department store chain and Bloomingdale's, lost 4.3 percent to a three-year low of $25.86.

Circuit City, the second-largest consumer electronics chain, tumbled 17 cents to $4.78. Dillard's, the retailer that operates mostly in the South, slid 80 cents to $19.50.

Wal-Mart Stores Inc., the world's biggest retailer, slumped 69 cents to $48.05. The National Retail Federation has forecast a 4 percent increase in total sales for the holidays, the smallest gain since 2002.

`Consumer-Led Recession'

``We're definitely heading into a consumer-led recession,'' said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based consulting and investment banking firm for retailers. ``Retail stocks have been killed this year and rightfully so, but the worst is yet to come.''

Merrill dropped 61 cents to $53.29. CIBC analyst Meredith Whitney had previously estimated Merrill would post a $6 billion writedown in the fourth quarter.

Property values fell 6.1 percent in October from the previous year, more than economists had forecast, according to the S&P/Case-Shiller home-price index. The decline was the biggest since the group started keeping year-over-year records in 2001. The index has fallen every month this year.

Berkshire Hathaway Inc., billionaire investor Warren Buffett's holding company, added $320 to $138,300 after saying it will pay $4.5 billion to take control of closely held Marmon Holdings Inc.

Hess Corp. led energy companies higher as crude oil climbed for a third straight day to a one-month high of $95.74 a barrel in New York. The fifth-largest U.S. oil company rose $2.27 to $104.65. Exxon Mobil Corp., the biggest U.S. oil company, rose 83 cents to $94.49.

U.S. stocks rose Dec. 24, sending benchmark indexes to the highest levels in two weeks, as falling interest rates and a $33.3 billion agreement to restructure Canadian commercial debt improved the outlook for credit markets.