Stocks Sink as Investors Seek Safety After Weak Sales Data

U.S. stocks are falling Wednesday as energy companies tumble along with oil prices. After a weak retail sales report, investors are looking for safety and buying government bonds and high-dividend stocks. As expected, the Federal Reserve raised interest rates for the third time in six months.

KEEPING SCORE: The Standard & Poor’s 500 index slid 6 points, or 0.2 percent, to 2,434 as of 2:55 p.m. Eastern time. The Dow Jones industrial average dipped 3 points to 21,325. The Nasdaq composite lost 30 points, or 0.5 percent, to 6,190.

Small-company stocks fell far more than the rest of the market. The Russell 2000 index sank 11 points, or 0.8 percent, to 1,414. That suggests investors are worried about the economy, which could have an outsize effect on smaller, domestically-focused companies.

The S&P 500, Dow and Russell all closed at record highs Tuesday.

THE FED: The Federal Reserve raised interest rates for the third time since December, something investors widely expected based on the Fed’s recent statements. Fed leaders suggested they still expect to raise rates again later in the year.

THE QUOTE: The weak retail sales report Wednesday, and some other disappointing reports recently, did not appear to change the Fed’s thinking even though higher interest rates tend to slow down economic growth.

“This economy has always been something of a healthy tortoise,” said David Kelly, chief global strategist at JPMorgan Asset Management. “I think growth will pick up a bit, but there is sort of a failure to bounce in this economy.”

BONDS: The Fed also gave more details about its plans to shrink its bond portfolio. Later this year, the Fed said it will reduce the amount of principal payments it invests in new bonds. It does not plan to sell bonds.

Investors have been pleased that the Fed is disclosing details of its plans and doesn’t intend to move too quickly. Still, Kelly said he thinks that will have a big effect on the bond market: as the Fed lets its balance sheet shrink and buys fewer bonds, prices will fall and yields will rise. That will send interest rates higher.

RETAIL SALES: The Commerce Department said people spent less money at gas stations, department stores and electronics retailers last month. The result was a surprise to analysts, who expected sales to grow. Video game seller GameStop gave up 43 cents, or 2 percent, to $21.55; and department store chain Kohl’s dropped 76 cents, or 2 percent, to $37.28.

Elsewhere, the Labor Department said consumer prices slipped, mostly thanks to lower energy prices. That showed how little inflation there has been in the economy, a continued concern for Federal Reserve policymakers.

REACTION: Bond prices jumped and yields fell to their lowest level since November. Concerned about weak growth, investors bought bonds and high-yield stocks. The yield on the 10-year Treasury note fell to 2.13 percent from 2.21 percent. Utilities and household goods makers climbed.

Banks fell. The drop in bond yields sent interest rates lower, which reduces the profits banks can make from mortgages and other loans. Citizens Financial dropped 63 cents, or 1.7 percent, to $36.25; and Lincoln National lost 80 cents, or 1.2 percent, to $67.75.

COMMODITIES: Oil futures plunged after the U.S. government said oil supplies shrank slightly last week and gasoline stockpiles grew. Benchmark U.S. crude fell $1.73, or 3.7 percent, to settle at $44.73 a barrel in New York. Brent crude, used to price international oils, shed $1.72, or 3.5 percent, to close at $47 a barrel in London.

Exxon Mobil lost $1.04, or 1.2 percent, to $81.92; and Halliburton sank $1.47, or 3.2 percent, to $44.37.

CURRENCY: The dollar slid to 109.53 yen from 109.96 yen. The euro jumped to $1.1221 from $1.1212.

BLOCK PARTY: Tax preparer H&R Block posted a bigger profit than analysts expected as well as slightly stronger sales. Its shares climbed $2.41, or 8.9 percent, to $29.40.

JOB POSTING: Biotech drugmaker Biogen fell and competitor Alexion Pharmaceuticals rose after the companies said Biogen Chief Financial Officer Paul Clancy will become Alexion’s CFO at the end of July. Analysts said Wall Street has a lot of respect for Clancy, who has been Biogen’s CFO for 10 years.

Matthew Harrison of Morgan Stanley said some investors may be worried that Clancy’s departure is a warning sign about an Alzheimer’s disease drug Biogen is developing, but Harrison said there is no connection.

Biogen gave up $8.78, or 3.4 percent, to $252.64; and Alexion jumped $9.53, or 8.8 percent, to $117.53.

METALS: Gold rose $7.30 to $1,275.90 an ounce. Silver jumped 37 cents, or 2.2 percent, to $17.14 an ounce. Copper slipped 2 cents to $2.57 a pound.

OTHER ENERGY TRADING: Wholesale gasoline sank 7 cents, or 4.5 percent, to $1.43 a gallon. Heating oil lost 4 cents, or 2.6 percent, to $1.41 a gallon. Natural gas fell 3 cents, or 1.1 percent, to $2.93 per 1,000 cubic feet.

OVERSEAS: Germany’s DAX advanced 0.3 percent and the CAC-40 in France lost 0.4 percent. The British FTSE 100 fell 0.3 percent. Tokyo’s Nikkei 225 retreated 0.1 percent, and the Hang Seng Index in Hong Kong advanced 0.1 percent. In South Korea the Kospi retreated 0.1 percent.