Wall Street concluded a third successive day of losses as Hurricane Rita gained strength and energy prices rose on fears of further disruption of supplies.
The arrival of Rita came as the corporate sector was still trying to quantify the fallout from Hurricane Katrina.
Avon Products , the cosmetics company, was the latest retailer to blame Katrina, and the resultant rise in fuel costs, as it cut its fiscal 2005 earnings forecast, just days after a similar move by rival Estée Lauder.
These worries were exacerbated by a further jump in oil prices as Rita, heading across the Gulf of Mexico, was upgraded to a category five storm - the strongest grade on the standard scale - raising fears of further woes for retailers.
The National Retail Federation warned that US holiday sales growth would slow to 5 per cent this year, compared with 6.7 per cent in 2004. Avon fell 11.8 per cent to $27, while department store group Sears fell 3.7 per cent to $115.15 and Wal-Mart, the world’s largest retailer, dipped 1.7 per cent to $42.49. The S&P Retailing index has fallen 12.6 per cent since late July.
“We are seeing the effect of dwindling consumer sentiment numbers, zero savings on a personal level, debt and an economy teetering on the brink of slowing down,” said Chris Johnson, director of quantitative analysis at Schaeffer’s Investment Research, who said that non-specialist retailers could see more selling pressure.
With Houston, Texas, preparing for an evacuation because of Rita, Continental Airlines, which has a hub in the city, fell 8.6 per cent to $9.91.
By the close, by midafternoon the Dow Jones Industrial Average fell 1 per cent to 10,378.03, with the technology-laden Nasdaq Composite off 1.2 per cent at 2,106.64 and the S&P 500 was 0.9 per cent weaker at 1,210.20.
But oil companies offered a bright spot, with ExxonMobil marked up 0.7 per cent at $64.97; Chevron 0.4 per cent better at $64.27; ConocoPhillips 2.2 per cent stronger at $70.43 and Murphy Oil 2 per cent firmer at $50.92.
Oil refiners made gains with Valero Energy, up 3.6 per cent at $113.14, and Sunoco, 4.5 per cent better at $78.10, both continuing their strong post-Katrina rallies. Bill Greehey, chairman and chief executive of Valero, said Rita’s impact on production and refining could be a “national disaster”.
Housebuilder Lennar eased 1.1 per cent to $53.49 even as the company said third-quarter earnings would beat Wall Street estimates, with the housing boom withstanding 11 successive interest rate rises.
Package delivery group FedEx was up 8 per cent at $83.15 as it raised its earnings forecast for the year to May 2006. The New York Times fell 6.6 per cent to a six-year low of $30 after announcing 500 job cuts and warning on profits.
