Dow plunges 125 points

The major stock indexes struck fresh lows for the year today as a cautious forecast from Apple Computer unsettled investors, who are growing uneasy about the US economy despite signs of continued improvement in the labour market.

The Dow Jones industrial average and the Standard & Poor’s 500 sank to five-month lows.

Following a disappointing retail sales report for March, investors seemed intent on focusing on negative news, but with the earnings season just under way, some analysts said it was too soon to assume the worst.

“We don’t think any kind of concrete opinion about earnings can come be formed yet because we’re still in the early stages,” said Brian Belski, market strategist at Piper Jaffray. “We are in defensive, reactionary times, which longer term, have traditionally provided good entry points.”

The Dow slumped 125.18, or 1.20%, to 10,278.75, its worst close since November 3, when it finished at 10,137.05.

The broader indexes also fell. The Nasdaq composite index shed 27.66, or 1.40%, to close at 1,946.71. The last time it closed lower was on October 26, when it ended at 1928.79.

The S&P 500 declined 11.74, or 1%, to 1,162.05; it has not closed lower since November 4, when it stood at 1161.67.

Analysts were struck by what many characterised as a shift in the market following Wednesday’s lower-than-expected retail sales results, which ignited fears of a slowdown in consumer spending, and in turn, corporate earnings.

The only thing that could ease those concerns could be upbeat forecasts for the rest of the year from market bellwethers reporting over the next few weeks.

Crude prices were volatile a day after flirting with a seven-week low. Light, sweet crude for May delivery slipped in early trading, but rebounded after falling below the 50 mark. Oil futures climbed 91 cents to settle at 51.13 per barrel on the New York Mercantile Exchange.

Treasurys were higher following the successful sale of inflation-indexed notes; the yield on the 10-year note slipped to 4.34%, down from 4.36% late on Wednesday. The US dollar strengthened against other major currencies; gold prices fell.

The number of Americans seeking unemployment benefits for the first time fell by 10,000 last week, a second consecutive week of improvement, according to the Labour Department. That brings the four-week moving average, designed to smooth out volatility, to 338,000, a level still seen as signalling improvement in the job market. The weekly data was in line with expectations.

Apple declined 9.2%, or 3.78, to 37.26, after the computer maker’s quarterly profits jumped more than sixfold thanks to its iPod music players. The results soundly beat Wall Street estimates, but Apple remains somewhat cautious about the prospect of sales in the kindergarten to high school market because of US state budget shortfalls that have curtailed public school districts’ spending.

General Motors plunged to a 12-year low after United Auto Workers officials indicated they were not willing to reopen a labour contract to negotiate lower health care costs. The car manufacturer lost 5.9%, or 1.67, to 26.66.

Among gainers, Kerr-McGee rose 6.7%, or 4.93, to 78.90, after the oil and gas company said its board had authorised a tender offer to buy back up to 4 billion of the company’s common stock at a price between 85 and 92 per share. Separately, the company said it reached a settlement with billionaire financier Carl Icahn, certain affiliated funds and Jana Partners LLC, who own 7.5% of Kerr-McGee collectively and were seeking election to the company’s board.

The Russell 2000 index, which tracks smaller company stocks, was down 10.60, or 1.76%, at 591.94.

Decliners outnumbered advancing issues by about 4 to 1 on the New York Stock Exchange.