NEW YORK After a spring of relative calm, the stock market was hammered to it worst close in months by surging oil prices and the government’s report of the highest monthly unemployment growth in 22 years. And it dragged most restaurant stocks right along with it.
Discretionary sectors like the restaurant industry fared particularly poorly as jittery investors read the rise in unemployment as a prelude to even less consumer spending. The Nation’s Restaurant News Stock Index recorded its largest one-day decline in a year, falling 36.11 points, or 2.97 percent, to 1,179.02. The last time the NRN Index fell to that level was in April, although Friday’s closing value was still not as weak as the index's performance in January. The NRN Index is market-cap weighted and includes all 64 restaurant companies trading on the major exchanges.
Friday’s market freefall promises to further darken an outlook that had already been turning grim. Restaurant securities analyst Larry Miller at RBC Capital Markets said in a report on Wednesday that his firm’s monthly consumer research found an all-time low in consumer attitudes and spending.
“The June results dismiss any notion [that] May was a bottom in consumer confidence,” he said. “The results also bruised our thesis calling for a recovery in restaurant stocks in the second half of 2008.”
The Dow lost nearly 400 points on Friday, closing down 3.13 percent to 12,209.81, its worse performance since mid-March. Reports indicated that investors were once again driven to sell by widespread fears about the weak dollar, surging oil prices and high unemployment.
The Labor Department's report on Friday said the economy lost jobs for the fifth straight month. The unemployment rate increased to 5.5 percent in May from 5 percent in April.
Reports also said Wall Street was chilled by new concerns about the financial services sector, with this week’s ouster of Wachovia’s chairman and Standard & Poor’s downgrading of such major banks as Lehman Brothers, Merrill Lynch and Morgan Stanley.
Friday’s decline marked a return to the triple-digit collapses -- and subsequent recoveries -- in February and March, when the bailout of Bear Stearns and the interest rate cuts from the Federal Reserve hit the market hard.
The S&P 500 index fell 43.37 points, or 3.09 percent, to 1,360.68, and the Nasdaq composite index declined 75.38 points, or 2.96 percent, to 2,474.56.
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