Wall Street loses ground

Wall Street extended its decline today, dipping lower after the Labour Department said productivity was flat in the third quarter while wages rose nearly 4%.

The data touched off concerns that the Federal Reserve would continue to wrestle with inflation, possibly raising interest rates again.

The Dow Jones industrial average posted its first five-day consecutive decline since June 2005 following the economic news and amid mixed reports from retailers on October sales, including Wal-Mart Stores, which had disappointing results last month and warned that November sales would also come in below expectations.

The economic data, which showed wage pressure was increasing at the fastest rate in more than 20 years, rattled investors who have grown concerned that the US economy might be slowing too quickly.

Wall Street wants a gradual slowdown so the Fed will cut interest rates.

One market observer was not worried, noting that the decline was modest. “In the grand scheme of what’s happened today and this week I’d say the markets are hanging in there,” said Brian Williamson, an equity trader at The Boston Company Asset Management.

The Dow, which fell below the 12,000 benchmark during the session, closed down 12.48, or 0.10%, at 12,018.54.

Broader stock indicators also declined modestly. The Standard & Poor’s 500 index fell 0.47, or 0.03%, to 1,367.34, and the Nasdaq composite index declined 0.33, or 0.01%, to 2,334.02.

Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.60% from 4.57% on Thursday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 83c to $57.88 a barrel on the New York Mercantile Exchange. Oil prices, whose decline had given a boost to stocks during their three-month rally, extended their decline in recent days but largely failed to prop up investor sentiment in the face of economic news.

Doubts remain about whether Opec will push through production cuts, pushing down the price of oil.

Meanwhile, the Labour Department said the number of newly laid off workers seeking unemployment benefits rose last week to its highest level in more than three months.

Investors appeared unfazed by a Commerce Department report that showed factory orders rose a lower-than-expected 2.1% in September.

Similarly, the markets showed little reaction to comments by Dallas Federal Reserve President Richard Fisher who said in prepared remarks that while overall inflation remained high it was possible that inflation had peaked and was “finally heading lower”.

Fisher is a non-voting member of the Fed’s Open Market Committee, which sets short-term interest rates, and gave the speech in New York.

TJ Marta, economic strategist at RBC Capital Markets, sees the rising labour costs for the third quarter and an upward revision for the second quarter as unnerving to many investors but said the Fed is looking for such a slowdown. “The Fed is trying to engineer a slowdown so this is all good.

"The plane is coming in for a landing.”

Among retailers, Wal-Mart fell 56c to $48.29 after reporting that it expects same-store sales, or sales at stores open at least a year, will be flat in November.

Wal-Mart’s disappointing news raised questions about whether the experiences of the world’s largest retailer indicated trouble ahead.

With the festive season approaching, Wall Street is hoping robust consumer spending will serve as a counterpoint to weak economic readings – from gross domestic product to consumer spending – that have been seen in recent days.

However, investors had bet that gas prices, which were down sharply from their year highs in July, would leave consumers eager to spend the extra money in their wallets. October sales results did not seem to bear that out, particularly for discounters.

Sharper Image fell $1.36, or 12.3%, to $9.67 after issuing a disappointing sales report, while speciality retailer Limited Brands rose 85c, or 3%, to $29.66 after posting stronger-than-expected results for October.

Hot Topic advanced 67c, or 6.8%, to $10.49 after the teen clothing retailer reported a wider-than-expected decline in same-store sales but predicted its fourth-quarter profit would likely be above what Wall Street had been expecting.

In other corporate news, Nomura Holdings agreed to acquire Instinet, the electronic stock broker, from private-equity firm Silver Lake Partners. Nomura, Japan’s biggest brokerage, fell 10c to $17.28.

Clark Inc, a compensation and benefits consultancy, jumped $3.90, or 31.2%, to $16.40 after agreeing to be acquired by a subsidiary of Aegon for $293m (€229.3m) in a tender offer.

Declining issues outnumbered advancers by about nine to seven on the New York Stock Exchange, where volume totalled 1.67 billion shares compared with 1.80 billion traded yesterday.

The Russell 2000 index of smaller companies fell 2.02, or 0.27%, to 750.13.