NEW YORK - Wall Street retreated further Friday as the financial health of the consumer came into focus following a report that showed personal spending at its weakest level in 17 months and a profit warning from J.C. Penney Co.
The Commerce Department said consumer spending ticked up by a slight 0.1 percent last month, in line with Wall Street's expectations. Word that personal incomes advanced by 0.5 percent surprised the market, which was looking for a 0.3 percent rise, but the news was not enough to spark a rebound in the stock market.
Trading was fairly muted following a week of high volatility that sent stocks sharply higher early in the week and then plunging near the end.
Investors appeared somewhat relieved after the Commerce Department's findings also showed that an important inflation gauge tied to consumer spending rose only 0.1 percent when excluding often-volatile energy and food costs. The reading — the Federal Reserve's preferred measure of inflation — is up 2 percent over the past 12 months. With so-called core inflation back within the Fed's target of 1 percent to 2 percent, it could be easier for the central bank to justify further interest rate cuts without fear of adding too much money to the economy and driving up prices.
But the profit warning from J.C. Penney offered renewed room for concern about the well-being of consumers and sent retailer stocks falling. As Wall Street tries to determine the degree to which the economy is slowing, any news that consumers are less willing to reach into their wallets is unwelcome. Consumer spending accounts for about 70 percent of U.S. economic activity.
"I'm viewing a day like today as sort of a continuation from where we were a month or two ago," said Les Satlow, portfolio manager at Cabot Money Management in Salem, Mass. "The U.S. recession concerns have resurfaced. They never went away but there was the beginning of the sense that this recession was going to be shallow and maybe a bit benign."
In late afternoon trading, the Dow Jones industrial average fell 35.09, or 0.29 percent, to 12,267.37.
Broader stock indicators slipped. The Standard & Poor's 500 index fell 4.60, or 0.35 percent, to 1,321.16, and the Nasdaq composite index rose 9.75, or 0.43 percent, to 2,271.08.
Declining issues outpaced advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 902.2 million shares.
Friday's quiet session came ahead of week expected to bring another round of key economic data and the end of the first quarter on Monday. With widespread weakness in the stock market many investors are likely eager to close the books on the losses and start fresh on Tuesday.
The day's moves follow two sessions of declines. The Dow fell 120 points Thursday as investors found little reason to continue a big rally that started the week; a government report on the gross domestic product confirmed a big economic slowdown in the fourth quarter.
Bond prices rose Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.46 percent from 3.52 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell $2.28 to $105.30 a barrel on the New York Mercantile Exchange.
J.C. Penney predicted a first-quarter profit of 50 cents per share, down from an earlier target of 75 cents to 80 cents. The stock fell $3.00, or 7.4 percent, to $37.52.
Kohl's Corp. fell $2.45, or 5.5 percent, to $42.07. Higher-end retailers lost ground as well. Macy's Inc. slid $1.12, or 4.8 percent, to $22.24, while Nordstrom Inc. declined $1.47, or 4.3 percent, to $33.12.
The Russell 2000 index of smaller companies fell 5.21, or 0.75 percent, to 687.18.
Overseas, Japan's Nikkei stock average rose 1.71 percent. Britain's FTSE 100 fell 0.43 percent, Germany's DAX index fell 0.28 percent, and France's CAC-40 declined 0.50 percent.