By Christina Rexrode
NEW YORK (AP) - Stocks gave ground Thursday as investors were underwhelmed by news of higher consumer spending.
By late morning, the Dow Jones industrial average was down 92 points to 13,015. The Standard & Poor's 500 fell 10 to 1,400. The Nasdaq slipped 28 to 3,053.
The government reported that consumer spending rose in July after holding steady in June and falling in May. Separately, retailers like Target (TGT), Costco (COST), Limited Brands (LTD) and Macy's (M) reported higher-than-expected August sales.
But investors were unimpressed. They worry that the increase is only temporary, and that higher gas prices will soon force people to cut back on shopping. Gas prices have spiked this week as Hurricane Isaac menaced the Gulf Coast. On Wednesday they hit a national average of $3.80 per gallon, the highest ever for that date.
Scott Freeze was among those who were less than inspired by the uptick in consumer spending. Freeze, president of the Street One Financial trading firm in Huntingdon Valley, Pa., can't get excited about consumer spending, with the unemployment rate stuck above 8 percent all year. And people who can't get jobs, or who are worried that they'll lose theirs, don't tend to spend freely.
Companies in general aren't hiring, Freeze said, and he thinks it's disingenuous when they blame the uncertainty of not knowing who will be president next year.
"They're saying, 'I don't know what my tax situation will be,' or 'I don't know if Obama will be president and I don't want to deal with Obama's health care plan,'" Freeze said. "I think these are just easy excuses for the corporations to use, because quite frankly the production levels and the revenue they're generating don't warrant hiring new employees."
Trading volume was light. The market has been in a late-summer lull for the past couple of weeks, with many traders on vacation, many European lawmakers taking a summer break, and a dearth of major economic developments. Since the start of last week, an average of 2.8 billion shares has traded each day on the New York Stock Exchange. Before then, the average daily volume for the year was a good 25 percent higher, at 3.8 billion.
Things could start to pick up Friday, when Federal Reserve Chairman Ben Bernanke is scheduled to speak at the central bank's annual meeting in Jackson, Wyo. If he hints that the Fed plans to take more action to boost the economy, it means he thinks the economy is doing poorly - but stocks will probably rise anyway, because investors tend to get excited about the possibility of more Fed intervention.
Or, Friday's speech could turn into a non-event. Fed officials often make statements that are hard to interpret, and many people doubt there's much the Fed can do anyway to try to boost the market.
Freeze said that many of his workers and clients planned to come to work Friday morning, listen to Bernanke's speech, and then head out early for Labor Day weekend if Bernanke doesn't say anything of consequence. "It's all wait and see," Freeze said.
Though there was no major news out of Europe, there were plenty of reminders of the debt crisis there and the strain it's causing. Greece's prime minister reminded his country that painful spending cuts were necessary if it wants to keep the bailout funds it has received from Germany and other stronger European countries. Germany reported that its number of jobless citizens ticked up in August, a reminder that Europe's strongman can't keep bailing out other countries forever.
And German Chancellor Angela Merkel visited Chinese Premier Wen Jiabao to try to soothe his fears about the European crisis. But Wen appeared to get only more alarmed, telling reporters afterward that weaker European countries like Greece, Spain and Italy must embrace spending cuts. China, the world's second-largest economy, is a buyer of European bonds.
Shares of Yelp (YELP) slipped 62 cents to $21.75, after a big, $4.11 jump the previous day. Investors had pushed the shares higher after realizing that insiders were hanging on to their shares, rather than selling them off as leaders have at some other tech companies, such as Facebook (FB) and Groupon (GRPN).
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