Stocks Fall on Economy Concern, Drugstores Off

Posted 21 September 2006 @ 09:31 pm EET     Print     Reprint     E-Mail     Comments

NEW YORK (Reuters) - U.S. stocks slid on Thursday after a report said factory activity contracted in the U.S. Mid-Atlantic region in September for the first time in over three years, prompting worries about a slowdown in the U.S. economy and corporate profits. Drugstore stocks fell sharply after Wal-Mart Stores Inc. said it would cut generic drug prices in Florida.

Hewlett-Packard Co., the computer and printer maker, fell after news reports said its chief executive may have been more closely involved in an investigation of leaks to the media than had been previously reported.

"I don't think the question anymore should be whether the economy is slowing. It really should be the degree to which it will slow," said Neil Wolfson, president of Wilmington Trust Investment Management in New York. "The Philly Fed index declined much more than was expected. That is a sign that manufacturers are cutting back, which could be due to the view that consumers will be slowing down."

The Dow Jones industrial average was down 91.81 points, or 0.79 percent, at 11,521.22. The Standard & Poor's 500 Index was down 6.35 points, or 0.48 percent, at 1,318.83. The Nasdaq Composite Index was down 13.01 points, or 0.58 percent, at 2,239.88. Shares of H-P, lost 4.7 percent to $35.05 on the New York Stock Exchange and ranked among the top drags on the Dow. The stock was the biggest negative influence on the S&P 500.

Wal-Mart's move threatened to lure customers away from pharmacy chains such as Walgreen Co. and CVS Corp., whose shares have climbed steadily since summer as consumer staples came back into favor.

Shares of Walgreen, the No. 1 U.S. drugstore chain, dropped 7.4 percent to $46.28, while shares of CVS, the No. 2 drugstore chain, slid 8.8 percent to $32.30. Rite Aid Corp., ranked No. 3, fell 6.5 percent to $4.45 and Longs Drug Stores Corp. shares fell 4.5 percent to $45.89.

Adding to worries about the strength of consumers and company profits, U.S. lead-month crude oil futures rose more than 1 percent, rebounding on technical factors after dropping to a six-month low on Wednesday.

Exxon Mobil Corp. shares, up 1.4 percent at $65.01, were the top gainer in both the Dow and the S&P 500 as higher crude prices could boost oil company profits. Rivals Chevron Corp. and ConocoPhillips both added about 2 percent to $62.11 and $58.46, respectively. U.S. crude for November delivery rose 86 cents to $61.60 a barrel, off a session high at $61.80.

Among Nasdaq stocks, shares of Apple Computer Inc. fell 1.2 percent to $74.38, while Starbucks Corp. shares shed 1.9 percent to $34.04. On Tuesday, cellphone maker Sony Ericsson said it would launch a new music download service called M-BUZZ for use on new mobile phones designed to compete with Apple's iPod. On Monday, Starbucks Chairman Howard Schultz said the company could withstand an economic slowdown.